Germany's retail sector overall sales dipped slightly by 0.2 percent in real terms compared to February, 0.2 percentage points above the consensus and reflecting cautious consumer behaviour. Yet, year-over-year figures present a more optimistic picture, with a 2.2 percent real growth over March 2024, indicating a broader recovery trend despite being 0.2 percentage points below the consensus forecast.

Food sales saw modest month-over-month growth (0.3 percent), suggesting steady demand for essentials. In contrast, non-food sales declined by 0.6 percent, hinting at reduced discretionary spending. Interestingly, online and mail-order retail continued to thrive, rising by 0.6 percent from February and recording a significant 9.5 percent increase over the previous year. This highlights the enduring shift towards digital retail channels.

The latest updates signal that recovery remains uneven across categories, taking the RPI to 6 and the RPI-P to 19, meaning that economic activities are slightly ahead of market expectations.

The consensus sees sales down 0.4 percent on the month -- after a 0.8 percent increase in the prior month -- and up 2.4 percent on year.

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.