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Economy in Brief

Retail Sales in the Euro-Area Lose Momentum
by Robert Brusca  July 5, 2011

EMU retail sales momentum is on the downswing. As we have seen in selected country level reports the European growth situation is losing some steam. Whereas in the US the MFG sector made some rebound for a very sharp drop in May the Euro-Area has made no such rebound. And in EMU, the consumer has seen a sharp drop off in German sales. The UK, and EU member, has seen sales fall abruptly in May as well. Only in France where May sales are not yet recorded is there no sense of encroaching weakness.

The Zone is not getting much boost from its consumer sector. Its leading sector which has been MFG is still losing momentum. Unemployment in the Zone is hovering at 9.9% where it has been stuck. Spain’s rate ticked up to 20.9% in May from 20.7% in April. The drag is not over entirely in Europe. In Greece the rate is stuck at 15%, Portugal is at 12.4%. Only Germany among the large countries has unemployment still ticking down form 6.2% in March to 6.1% in April to 6% in May; although France has one monthly decline it its unemployment as it dropped from 9.6% in April to 9.5% in May.

With this background, persisting high unemployment, and with the main driving sector for growth losing momentum, amid what have been and will probably continue to be unsettled conditions over the debt levels in member countries, it is not a surprise to see that consumer spending is not holding up.

But the world cannot run with every country on export-led growth. That defies the arithmetic of global current account imbalances. I can’t net-export to you and have you net-export to me, too. If one is a net exporter the other is a net importer in a two country world. In a more populated world similar kinds of stories can be told.

For a month or two more we may remain in this enigmatic zone of growth as we work out of the effects of the spurt in global energy prices, the European debt threat and the impact of Japan’s disasters and its supply chain repercussions. To be sure there are other issues with global impact at work. But we have had a clustering of negative factors early in the year and we can chalk up some of the weakness to that. How much?

That will be a question for the period ahead when these headwinds, along with others, abate as we expect. We expect growth to resume. It is a critical time for growth. But markets seem to have brushed aside their fears of the future as the Greek debt deal got done. Even with the US economy seemingly hanging in the balance with soft-spot in growth, markets seem to believe that growth will press on in the second half. It is good news that despite repeated bad news and unexpected blows to the trend of growth some degree of optimism holds sway on the outlook. For that to be justified consumers around the world will have to step up.

Euro-Area Retail Sales
  May-11 Apr-11 Mar-11 3-Mo 6-Mo 12-Mo
Zone Total Volume -1.1% 0.7% -0.9% -4.9% -0.3% 0.7%
Motor Vehicle Reg 4.0% 6.8% -8.3% 7.4% 16.6% 4.3%
NonFood Country Detail: Volume
Germany Value -2.8% 0.0% -1.6% -16.4% -5.1% -4.5%
France #N/A 0.5% -0.6% 2.1% 4.7% 4.0%
Italy(Total; Value) #N/A 0.4% -0.1% 1.6% 0.2% 0.3%
UK(EU) Volume -1.4% 1.1% 0.0% -1.1% -1.7% 0.2%
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