Retailers continued to struggle at the start of the year. Following a revised 0.5 percent monthly drop in December, volumes sales fell a further 0.4 percent, easily undershooting the market consensus and making for a third decline in as many months. Indeed, purchases have expanded only once since last May. Unadjusted annual growth was minus 1.6 percent, up from minus 3.4 percent but below zero for the sixth time in the last seven months.

The January update is consistent with the sustained weakness of consumer confidence and with sentiment deteriorating again in February; prospects for this month are probably no better. Spending on services has been more robust but private consumption could easily subtract from GDP growth in the first quarter. Today's data leave both the German RPI (minus 19) and RPI-P (minus 23) below zero and so increase the downside risk to economic activity in general this quarter.

Retail sales volumes are expected to rise 0.5 percent in January versus December's steeper-than-expected 1.6 percent fall.

Retail sales measure the total receipts at stores that sell durable and nondurable goods. The data are compiled from about 27,000 retail businesses and are reported in both nominal and volume terms. Autos are excluded. A very limited breakdown of subsector performance is available in the initial report which is itself subject to sometimes sizeable revision but much greater detail is provided in the following month's release.

With consumer spending a large part of the economy, market players continually monitor spending patterns. Retail sales are a measure of consumer well-being. 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. However, by excluding the services sector, changes in retail sales data can differ significantly from those in total household spending.