Demand in the retail sector remained very sluggish in May. Volume sales edged just 0.1 percent higher on the month, matching the market consensus but not fully reversing a shallower revised 0.2 percent drop in April. The increase reduced annual growth from 0.6 percent to 0.3 percent and means that purchases have risen just 0.5 percent since the end of 2024.

As it is, May's minimal monthly advance was wholly attributable to gains in food, drink and tobacco (0.7 percent) and auto fuel (0.4 percent). Excluding auto fuel, non-food sales fell 0.2 percent.

Regionally, both France (minus 0.2 percent) and Spain (minus 0.6 percent) posted fresh losses, the former recording a third straight drop. Italy (0.1 percent) matched the headline rise and elsewhere, the picture was again very mixed.

The May data leave Eurozone sales in the first two months of the quarter a modest 0.3 percent above their average level in the first quarter. Absent revisions, June will need a fall of at least 0.9 percent to prevent the sector from contributing positively to GDP growth. Nonetheless, in general spending remains subdued and with consumer confidence still historically soft and improving only very gradually, near-term prospects look little better. Today's report puts the region's RPI at 8 and the RPI-P at 2. Overall economic activity is just about running ahead of market forecasts.

Retail sales volumes in May are expected to inch 0.1 percent higher on the month after April's weak 0.5 percent fall.

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.