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Economy in Brief

EMU Retail and Auto Sales: the Good and the Ugly
by Robert Brusca August 5, 2009

Sales fall -Retail sales fell in the Zone in June. While the growth rat of sales is not decaying further, retail sales volumes have been dropping at a pace of -2.5% to -2.2% over the past twelve months. The year-over-year pace for retail sales seems to have finally stopped falling, based on the trend in the chart above.

The Good and Ugly of it all - Europe has not suffered the same sort of spurt in the rate of unemployment that we have in the US. But its level of unemployment remains high and it has become even more elevated than it was. Consumer confidence has been hit and consumers, even though better supported in Europe than in the US by government programs, have cut back spending. Various programs in Europe to spur auto sales have been successful as the auto registration data show. So even as retail sales volumes shrink there is a bright spot in the retail sector even if it is one aided by government actions. It is always good to see that when given an incentive the consumer can and does respond – that is not always the case.

Underlying trends are improving - The PMI index from Markit on the service sector shows some improvement in the service sector but not much. Services has improved to a reading of 44.82 in may then they slipped to 44.65 in June and in July they have risen to 45.69. German showed a rather sharp rise in July along with Italy while France has back-slipped in July along with Spain. The UK, an EU member not an EMU member, has just posted its third reading in a row above 50 for services and is the only large EU country showing service sector expansion.

Trends that matter are more favorable - Since most of the jobs are in services and since jobs determine spending we can be encouraged about prospects for retail sales progress from these developments. Retail sales remain the back bone of GDP growth.

Euro Area Retail Sales Volume
  M/M Saar
  Jun-09 May-09 Apr-09 3-Mo 6-MO 12-Mo
Euro Area Total -0.2% -0.2% -0.2% -2.2% -2.5% -2.5%
Food, Beverages, Tobacco -0.1% -0.1% -0.2% -1.8% -2.1% -2.1%
Motor Vehicle Registration 6.4% 2.3% 6.3% 79.6% 45.1% 10.6%
Non-Food Country Detail: Volume
Germany -1.8% -1.3% 1.4% -6.9% -5.5% -1.9%
UK(EU) 1.2% -1.0% 0.8% 4.0% 1.3% 2.8%
The EA 13 countries are Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia
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