Retail trade in the euro area edged down by 0.2 percent in December 2024 compared to November, following a stagnant performance in the previous month. The decline was primarily driven by a 0.7 percent drop in food, drinks, and tobacco sales, partially offset by modest increases in non-food products (0.3 percent) and automotive fuel (0.2 percent).

Despite the monthly dip, retail trade remained stronger on an annual basis, with December 2024 sales rising by 1.9 percent compared to the previous year. This growth was propelled by a robust 3.1 percent increase in non-food product sales and a 1.2 percent uptick in automotive fuel purchases, while food, drinks, and tobacco saw a marginal 0.2 percent rise.

Regionally, France (minus 0.2 percent after 0.2 percent) and Germany (minus 1.6 percent after 0.0 percent) recorded falls while Italy (0.3 percent after minus 0.3 percent) and Spain (1.4 percent after minus 0.6 percent) recorded fresh increases.

The data suggests that while consumer demand remained resilient over the year, short-term pressures curbed spending momentum at year-end. With non-food items leading the annual growth, retailers may need to navigate fluctuating consumer confidence and purchasing trends as they enter 2025. The latest update takes the Euro RPI to minus 10 and the RPI-P to minus 14. This means that economic activities are lagging behind market expectations.

Sales are expected flat on the month and up a modest 1.9 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.