Small eurozone retail sales rise in July not enough to inspire

(Alliance News) - Retail sales in the eurozone ticked higher in July, data from Eurostat showed, but came in below expectations and did not claw back some of the steep drop seen the previous month.

Retail sales increased 0.3% in July compared to June, both in the euro area and the EU, data from Eurostat showed Monday.

However, the monthly rise in the eurozone was behind consensus estimates of a 0.4% increase, as cited by FXStreet, and only reversed some of the 1.0% decrease seen in June.

Capital Economics Senior Europe Economist Jessica Hinds said: "The small rise in eurozone retail sales volumes in July only partly reversed the previous month’s big fall, and with consumer confidence very weak and the final PMI surveys for August suggesting that price pressures remain acute, renewed declines in retail sales seem likely in the coming months."

ING noted the small rise is in keeping with the downward trend seen in recent months.

"The peak in retail sales was in November and sales in July were about 2.5% below that level. Food and fuel caused the small increase in July as all other items saw a decline of 0.4% in terms of sales volumes. A strong increase in Germany and the Netherlands masked declines in the other large eurozone markets," ING's senior eurozone economist Bert Colijn said.

"Don't expect this to be the start of a sustained upturn in sales. The outlook remains rather bleak for the months ahead as real incomes go through an unprecedented squeeze due to high inflation and lagging wages. We expect consumption to contract for the coming quarters on the back of this."

On an annual basis, retail sales declined 0.9% in the euro area, and dropped 0.5% in the EU.

In the eurozone, retail trade volumes increased 0.4% for automotive fuels and 0.1% for food, drinks & tobacco, but dropped 0.4% for non-food products.

Colijn added: "For the European Central Bank though, it is definitely no smoking gun for the start of a contraction. With the September meeting coming up and October of course not long after, the doves are looking for clear evidence that the economy is moving into contraction territory.

"Today's data will, in that sense, not be of much help. Still, evidence of a recessionary environment is likely to become more apparent as new data comes in."

By Paul McGowan; [email protected]

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