In September, Germany's retail sector showed promising growth, with real sales climbing by 1.2 percent month-over-month, well above the market consensus, and 3.8 percent year-over-year. The nominal increase of 0.6 percent month-over-month, hints at declining mineral oil prices, easing inflationary pressure and enhancing consumer purchasing power. Yearly comparisons reveal robust growth, particularly notable as September 2023 and February 2024 marked historic lows since 2021.

Food retail sales showed a minor monthly decline of 0.8 percent in real terms, but a yearly uptick of 0.3 percent. Non-food sectors performed better, rising by 1.7 percent monthly and 6.1 percent yearly, indicating increased consumer interest in non-essentials. Online and mail-order retail sales surged significantly, with a monthly gain of 3.1 percent and an impressive 17.9 percent year-over-year gain, suggesting a shift towards convenience shopping.

These results collectively underscore a gradual recovery, with consumers favouring online platforms and non-essential goods, perhaps reflecting increasing consumer confidence and economic resilience. Today's update takes the RPI to 49 and the RPI-P to 46, both readings showing economic activity in general are running well ahead of market forecasts.

As German consumers remain loath to spend, forecasters look for retail sales down 0.5 percent on the month.

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.