Retail sales were weak at the end of 2023 but were at least revised significantly stronger in November. December saw volumes drop a hefty 1.1 percent on the month, just marginally more than the market consensus and after a 0.3 percent gain in mid-quarter. The decline put annual growth at minus 0.8 percent, down from minus 0.4 percent, and left purchases at their lowest level since April 2021.

December's monthly fall was broad-based, reflecting weakness in food, drink and tobacco where sales were down 1.6 percent; non-food, ex-auto fuel at minus 1.0 percent; and auto fuel minus 0.5 percent.

Regionally, the headline slide was again dominated by Germany where sales contracted a further 1.6 percent after a 0.8 percent decrease in November. However, both France (minus 1.0 percent) and Spain (minus 1.4 percent) also recorded fresh losses as did most other member states.

Today's update means that fourth-quarter Eurozone volume sales were 0.1 percent below their level in the third quarter. This implies only a minor hit on GDP growth but the trend remains down and, ominously, consumer confidence deteriorated in January. Retailers are likely to struggle this quarter too. The December data reduce the region's RPI to minus 13 and the RPI-P to minus 8, but both values now showing recent overall economic activity slightly lagging market expectations.

Retail sales volumes in December are expected to fall 1.0 percent on the month following a 0.3 percent decrease in November that left volumes down 1.1 percent on the year.

Retail sales measure goods that are sold to the consumer or end-user, generally in small quantities and in the state in which they were purchased by the retailer. Eurozone retail sales are reported monthly, in volume terms and exclude autos and motorcycles. A limited sector breakdown is presented in the first release but much more detail is available in the following period's release.

Retail sales are important indicators of domestic consumer demand and are monitored closely by analysts as an important input to GDP. If you know what consumers are up to, you will have a pretty good idea on where the economy is headed. Needless to say, that's a big advantage for investors. The data are available in both value and volume measures although the press release deals only with volume. In addition to the total, the initial report provides a limited breakdown that separately identifies food, drink and tobacco, and (excluding automotive fuel) non-food products. A more comprehensive dataset is only available with the following month's release. Unlike the U.S. and Canada, auto sales are not included in the retail sales data.

The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps auto sales are especially strong or apparel sales are showing exceptional weakness. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.