The December 2024 retail sales report showed that while real retail sales declined by 1.6 percent compared to November 2024, the annual comparison tells a more optimistic story, with a 1.8 percent increase over December 2023. This suggests that consumer spending remained resilient over the year despite short-term slowdowns.

A deeper sectoral analysis reveals diverging trends. The food retail sector saw a 0.4 percent real decline year-over-year, indicating possible shifts in consumer spending habits, cost-conscious shopping, or changing festive consumption patterns. In contrast, non-food retail sales surged by 3.4 percent, highlighting stronger demand for discretionary and holiday-related purchases. The month-over-month drop in both sectors-1.7 percent in food retail and 0.7 percent in non-food retail-suggests that the Christmas shopping peak occurred in November 2024, likely driven by early promotions and online retail events.

Overall, the second half of 2024 proved stronger for retail, reinforcing a gradual recovery from past economic challenges. The performance emphasises the evolving consumer behaviour, a dynamic retail landscape, and the influence of inflationary pressures on purchasing power, changing the RPI to minus 4 and the RPI-P to minus 4. This means that economic activities are generally within the expectations of the German economy.

Retail sales are expected flat on the month, not an inspiring performance after a decline of 0.6 percent in November. The consensus also sees sales up 2.6 percent from a year ago versus 2.5 percent in November.

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.