Retail trade in the euro area showed mixed dynamics in May 2025, reflecting the impact of consumer caution and shifting spending patterns. Compared to April, retail volumes declined by 0.7 percent, reversing the modest 0.3 percent growth recorded in the previous month. All major sectors experienced monthly contractions: food, drinks and tobacco dropped by 0.7 percent, non-food products by 0.6 percent, and automotive fuel by a sharper 1.3 percent, pointing to broader demand-side restraint possibly linked to cost-of-living concerns or volatile fuel pricing.

However, the annual picture was more encouraging. Compared with May 2024, retail trade rose by 1.8 percent, signalling a gradual recovery in consumer confidence. The most substantial growth came from automotive fuel (2.8 percent) and non-food products (2.4 percent), indicating rising mobility and discretionary spending. Even essential items like food and drink posted a modest 0.5 percent annual gain, underscoring some stability in household purchasing behaviour.

Overall, while monthly volatility suggests near-term headwinds, possibly influenced by inflationary pressures or subdued wage growth, the annual gains imply that retail activity is on a slow but positive trajectory. Policymakers may need to monitor household resilience, as further economic tightening could dampen fragile consumer momentum. This latest update takes the RPI to minus 12 and the RPI-P to minus 14. This means that economic activities remain well behind market expectations in the Euro Area.

Sales are expected down 0.7 percent on the month and up 1.6 percent on year in May after rising 0.1 percent on the month and 2.3 percent on year in April.

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.