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Economy in Brief

Euro Area Retail Sales Crash Hard  Consumer Spending Plans Continue To Be Cut...
by Robert Brusca December 3, 2008

After Germany reported out such weak sales this month, the gauntlet was thrown down of all of EMU. EMU sales are slipping and doing so at an accelerating pace. They dropped by 0.8% in October alone. The three-month growth rate is -2.6% the 6-month growth rate is -1.6% but that is a bit better than the 12-month pace at -2.3%. Food purchases are stabilizing to some extent but nonfood sales are in a slide that is gathering sharp downward momentum.

The growth rates for the PRODUCT CATEGORIES do not show the slowing in the headlines because they are only current through Sept. It seems that much of the weakness in nominal sales is recent and is masked by the pick up in inflation. The chart shows the growth of EMU retail sales volumes. Its trends revels clearly that sales volume trends have been decelerating sharply and that sales are shrinking.

The EMU PMI indices have been showing deterioration most sharply in the past few months. Moreover those series are more topical with observations for November while retail sales headlines are available for October and component data are fresh only through September. The more topical data and the inflation adjusted data tell the most pessimistic story and unfortunately these are the more reliable reports at the moment.

The European consumer will be contributing to this weakness more in the coming months. Dropping consumer confidence and a sharp cut in the German auto industry’s outlook for its sales contribute to such a view. The spike up in Ireland’s rate of unemployment to its highest mark since 1998 and Spain’s drop in consumer confidence are further signs of growing and widespread deterioration. The signs of weakness are there throughout the Zone and the UK and are they growing in intensity and spreading across the region. Any European that though that the slowdown would be confined to the ‘other side of the pond’ is now thoroughly disabused of that notion.

Ezone (15) Retail Sales Volume
  Oct-08 Sep-08 Aug-08 3-Mo 6-Mo 12-Mo
Euro Area 15 Total -0.8% 0.0% 0.1% -2.6% -1.2% -2.3%
Food -0.5% 0.1% 0.4% 0.0% -1.5% -2.5%
Nonfood -0.9% 0.0% -0.1% -3.8% -0.6% -2.0%
Textiles #N/A 2.6% -1.7% 14.0% 12.5% -0.9%
Books news #N/A -0.2% 0.0% 3.0% 1.8% 0.0%
Pharmaceuticals #N/A -0.2% 0.4% 1.8% 2.5% 1.6%
Other Nonspecial #N/A -0.5% -0.5% -0.4% -1.1% -3.2%
Mail Order #N/A 1.0% -1.9% 10.7% 6.2% 2.3%
Country detail: Volume
Germany: Volume excl Auto -1.6% -1.0% 1.6% -3.9% -2.2% -1.4%
Italy (Total Value) #N/A 0.3% -0.5% 1.5% 0.4% 0.0%
UK (EU): Volume -0.1% -0.6% 1.1% 1.7% 1.7% 2.0%
Shaded areas calculated on a one-month lag due to lagging data
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