Eurozone retail sales slides back to moderate growth trend - ING

Bert Colijn, Senior Economist at ING, notes that the Eurozone retail sales dropped slightly in August, -0.1% MoM while on a yearly basis, growth dropped from 1.8% to 0.6% YoY, but retail sales are still likely going to contribute positively to household spending growth in Q3.

Key Quotes

“Analysts had expected retail sales to drop more, but much of this positive surprise was because of the downward revision of the very strong July growth of 1.1% MoM to a more realistic 0.3%. The consumption environment was strong early in the year, but has recently shown more modest growth under dropping consumer confidence and declining tailwind from the job market.

Consumer confidence dropped significantly in August and September’s bounce back was only modest. This indicates that consumers continue to adopt a wait and see attitude towards their shopping in the Autumn months. The weaker labour market conditions are also not helping here, as retail sales received a strong push from people returning to work earlier in the year and the stagnation in unemployment declines is therefore concerning for the consumption outlook in the months ahead.

Even though this is the case, sales are still likely going to contribute positively to GDP in the third quarter. The hand-off from Q2 was quite strong and July’s growth still helps consumption ahead in the quarter. Only a drop of 1.3% MoM or more would result in declining quarterly sales. While consumers are cautious, it seems that such a drop in shopping is likely to be avoided for September.”