Retail sales were much stronger than expected in September. Although a 0.5 percent monthly increase was only in line with expectations, this followed a sharply upward revised 1.1 percent bounce in August that reflected the incorporation of delayed German data. Combined with additional earlier revisions, this equated with a rise in the yearly rate from 2.4 percent to 2.9 percent, more than double the market consensus. Volumes have now expanded for three months in a row

Moreover, September's monthly gain was led by the non-food subsector where, excluding auto fuel, purchases were up 1.1 percent, building on an even larger 1.2 percent advance last time. Food, drink and tobacco fell 0.4 percent but auto fuel gained 0.2 percent.

Regionally, France (minus 0.5 percent) lost ground but both Germany (1.2 percent) and Spain (1.0 percent) recorded fresh increases. Elsewhere the picture was similarly mixed.

Nonetheless, the updated sales data paint a very different picture of the Eurozone retail sector than the August report. Then, overall third quarter purchases looked set to fall versus the previous period. As it is, they posted a very respectable 0.9 percent advance. This should come as some relief to the ECB which has clearly become increasingly concerned about the sluggishness of domestic demand. That said, another cut in key interest rates next month remains very likely. Today's update puts the region's RPI at 18 and the RPI-P at 8, showing recent economic activity in general running just slightly ahead of market expectations.

Retail sales are seen rising a decent 0.5 percent on the month and 1.3 percent on year in September after gains of 0.2 percent and 0.8 percent respectively in August.

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.