Retail sales edged firmer at the start of 2023 but failed to fully reverse December's decline. Volumes rose only 0.1 percent on the month, just beating the market consensus but after a smaller revised, but still sizeable, 0.6 percent drop at year-end. The minimal increase put annual growth at minus 1.0 percent, down from minus 0.5 percent and a 4-month low.

January's monthly advance came courtesy of a 1.0 percent jump in purchases of food drink and tobacco, their first rise since last September, and a 1.7 percent spurt in auto fuel. Excluding food and auto fuel, sales fell 0.2 percent, compounding a 0.9 percent drop in December.

Regionally, it was the usual mixed performance, reflected in a 1.2 percent bounce in France and a 0.4 percent decrease in Germany.

Today's update leaves intact a subdued trend in overall Eurozone sales and a January level 0.2 percent below the fourth quarter average. Looking ahead, consumer confidence provisionally improved in February but was still historically weak and with hopes of a near-term cut in ECB interest rates fading, the first quarter seems unlikely to show any significant recovery. Even so, the January data lift the region's RPI to 15 and the RPI-P to 14, both readings showing recent economic activity in general modestly outperforming market expectations.

Retail sales volumes in January are expected to hold unchanged on the month following a marginally deeper-than-expected 1.1 percent fall in December that left volumes down 0.8 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.