ROB Insight is a premium commentary product offering rapid analysis of business and economic news, corporate strategy and policy, published throughout the business day. Visit the ROB Insight homepage for analysis available only to subscribers.
Euro zone retail sales surged in May. No, that's not a typo and yes, I was surprised too. And one of the world's most respected global equity strategists thinks the trend will continue.
As an investment theme, euro zone retailers are increasingly interesting on a few fronts, not just reflexive contrarianism. Market carnage has been justifiably severe in the region and bargain valuation levels are available. The region should also benefit from the ongoing "get me out of emerging markets and back into the developing world" trend among global money managers.
This chart shows the progress of the euro zone purchasing managers' survey for regional services industries and year over year retail sales. The recent spike in retail sales, while not quite enough to escape negative territory, was huge and surprising.
Credit Suisse global strategist Andrew Garthwaite thinks the strong retail sales results were only the beginning, "European GDP growth continues to recover – and domestic demand is set to surprise to the upside." Mr. Garthwaite lists a recovery in European consumer demand as one of his "most likely to persist" trends for the second half of 2013.
There are, as you might imagine, a number of European retail stocks highly correlated with regional retail sales. French giant Carrefour SA, the second largest retailer in the world behind Wal-Mart, is a notable example. German pharmaceutical retailer Celesio AG is another example and Brussels-based supermarket and drugstore operator Delhaize also looks interesting.
This investment idea is probably not for everyone, but all investors should note the startlingly positive trends in the European economy.
Scott Barlow is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here to read more of his Insights , and follow Scott on Twitter at @SBarlow_ROB .
Scott Barlow