Retail sales Euro area flat in December

02-04-2010 09:06

Retail sales in the Euro area ended its period of growth in December as consumers decreased spending in spite of the Christmas and New Year holidays. Retail trade maintained its volume in the last month of 2009 in comparison to November, according to the latest Eurostat figures, while a 0.4% growth was expected. The month-on-month decrease in November was corrected to 0.5% from 1.2%. On a yearly basis, sales dropped by 1.6%, which is less than the 2% decrease in November and also less than the forecasted 2.4% decline.

Consumer confidence

High savings, low inflation and recovering consumer confidence are optimistic signs for consumers, according to Jennifer McKeown of Capital Economics. However, as unemployment continues to rise, a major improvement in consumer confidence may not be realistic, she added.

Sales – consumption

The non-food sector sales were down 0.2%, while the tobacco, food and drinks category demonstrated a 0.3% rise in sales. In twelve EU nations retail trade rose, while seven member states showed a decline. Austria recorded the strongest rise, followed by France. The largest declines were registered in Malta, Portugal and Romania.
The general trend remains that consumption is still extremely restrained across the entire Eurozone, and there are very few indications of a strong improvement in household spending, according to Colin Ellis, an economist at Daiwa Capital Markets Europe. Consumption is expected to provide little support to gross domestic product expansion in general, she commented.

EU27

In the 27 European Union nations (EU27), retail sales in general dropped by 0.1% monthly in December in comparison with a corrected 0.5% decline in November. In contrast to December 2008, sales fell 1%. The Eurozone showed a 2.3% fall in the average volume of the 2009 retail trade index, while the 27 European Union countries recorded a 1.7% decrease.

Spending

Overall consumer spending in the national accounts may have increased a little bit in the last quarter of 2009, ING Bank economist Martin van Vliet said. Many consumers remain anxious about losing their job and possible fiscal tightening, according to the ING Bank economist.

Private sector

The economic improvement in the Euro area may have lost pace in the private sector in January, according to a Markit Economics survey. The weighted average of the services purchasing managers’ index and manufacturing indexes, the composite output index, dropped to 53.7 last month in comparison to the highest reading in 26 months of 54.2 in December.