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Economy in Brief

Retail Sales Trend are Slipping Everywhere in the Euro Area
by Robert Brusca September 3, 2008

Euro Area 15 retail sales are off by 0.4% in July their second straight month of declining. Food and nonfood sales each are off for two months running as well. In the current quarter to date sales volumes overall are falling at a 4.8% annual rate. For food alone the new in-quarter drop is at a pace of -7.5% while nonfood sales are contracting at a -2.3% annual rate.

The detail on sales lags the headline availability by one month. Since May was a bit of an ‘up month’ even the declines in June do not produce much of a trend of weakness for the area by detailed group. But by July the back-to-back declines in overall sales should make the withering trends by retail sales component more apparent. German sales volume trends ex autos are clearly pointing lower as are even the lagged Italian trends. For the UK, however, sales trends are still holding up as of July. May and June brought horrific sales swings (offsetting) to the UK and will make trend reading a bit harder to make sense of in the coming months.

The consumer is an important part of the Euro Area economy and now retail sales are off sharply. Private consumption is 56% of Euro Area GDP. But capital spending at 23% is another huge chunk of it. Euro exports and imports are each about 45% of GDP while in the US the comparable ratio is about 15%. So while the consumer is important for Europe at 56% of GDP the US ratio of 70% makes the consumer relatively more of a force there. Still, having such weakness for 56% of your economy is not a good sign. And Europe is showing slowing across private consumption as well as capital formation. Net exports have been gradually supplying less and less of a boost to GDP. Losing the consumer to the forces of negative growth will be a blow to the European economies.

Euro Area 15 Retail Sales Volume
  Jul-08 Jun-08 May-08 3-Mo 6-MO 12-Mo
Euro Area 15 Total -0.4% -0.8% 0.6% -2.9% -4.4% -3.0%
Food -0.8% -0.7% 0.0% -5.9% -4.6% -3.6%
NonFood -0.1% -0.9% 1.0% -0.1% -3.9% -2.4%
Textiles #N/A -2.6% 6.1% 11.3% -0.7% -2.7%
Books news, etc #N/A -1.0% -0.2% 0.6% -0.1% -1.6%
Pharmaceutical #N/A 0.5% -0.4% 2.9% 1.7% 2.3%
Other NonSpec #N/A -1.7% 0.6% -1.0% -1.8% -2.8%
Mail Order #N/A -1.2% -1.0% 1.1% -5.3% -3.4%
Country detail;Volume
Germany:VolxAuto -1.5% -1.4% 1.3% -6.2% -5.4% -3.2%
Italy(Total; Value) #N/A -0.5% 0.2% -1.1% -1.3% -1.0%
UK(EU):Vol 0.8% -4.3% 4.0% 1.2% 0.4% 2.0%
Shaded areas calculated on a one-month lag due to lagging data.
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