Euro area retail trade softened in July 2025, with seasonally adjusted volumes falling 0.5 percent from June, reversing part of the 0.6 percent gain seen the previous month. The contraction was driven mainly by weaker sales of food, drinks, and tobacco (minus 1.1 percent) and a sharper decline in automotive fuel (minus 1.7 percent). Only non-food products, excluding fuel, registered modest growth (0.2 percent), suggesting consumer demand for discretionary goods held firmer than essentials.

On an annual basis, however, the picture was better. Compared with July 2024, retail trade volumes rose 2.2 percent, reflecting steady recovery in household spending. Non-food products led the growth (3.1 percent), supported by stronger demand in sectors such as clothing, electronics, and household goods. Sales of automotive fuel (2.3 percent) and food, drinks, and tobacco (0.9 percent) also improved, highlighting a broad-based year-over-year upturn.

The contrast between monthly and annual performance suggests that consumers remain cautious in the short term, influenced by inflationary pressures and uneven wage growth; yet overall retail activity is trending upward compared to last year. This divergence reflects fragile momentum in euro area consumption, with resilience in non-food spending offsetting pressure on essentials and energy-related categories. This update takes the euro area RPI to minus 5 and the RPI-P to minus 17, meaning that economic activities adjusted for prices are now behind the expectations of the euro area economy.

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.