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Economy in Brief

German Retail Sales Go Erratic and Stay Weak
by Robert Brusca  September 30, 2011

German retail sales took a sharp turn lower in August. Vehicle registrations were lower as well. Real retail sales excluding autos fell sharply in August as well. Nominal retail ex-auto sales are actually on a modest accelerating profile. But because of the erratic month-to-month changes it is hard to take the trends seriously. Germany’s sales acceleration is importantly dependent on a large spike in June sales and one that is just about to exit the three-month growth calculation leaving near term momentum much weaker unless September sales are a real upside surprise.

The UK and Spain are experiencing the same sort of erratic behavior in retail sales. Like Germany, sales are erratically improving in the UK but they are on a clear deteriorating path in Spain. Because of the uneven pattern of sales we cannot be sure where trends are headed. And we continue to get various bits of data that surprise us. Still, unfolding events in the Zone give us a clearer picture of the likely path and likely risks and they still seem to be on the downside.

Even so, Europe is proving to have some resiliency. The Zone’s unemployment rate was steady in August, holding at 10% for the third consecutive month with the numerical total of the unemployed dropping by 38,000. Despite all sorts of gyrations and uncertainties in Italy, its rate of unemployment fell in July by one notch from 8% to 7.9%. German unemployment fell in September.

While the labor market is famous for its lagging behavior, the Euro-Area countries continue to come up with surprises. The truly troubled countries continue to be weak and to have trouble: Greece, Portugal, Spain, and Ireland. But Italy has been on the cusp of trouble and has seen its ability to launch effective government bond auctions impeded. Still it has posted a drop in its rate of unemployment.

The mostly likely situation is that the labor market is simply playing out its usual role as a laggard and even with its continued ‘good news’ weakness continues to encroach. The Manufacturing and Services PMIs for EMU continue to decay and to point the way lower. But as of August retail sales are still showing enough life over recent months to hold the three month growth rates up and the labor markets still had some upside surprises too. With inflation in the Zone having spurted unexpectedly in September the ECB has a tougher path on monetary policy to accompany its well-known dilemma over broader issues of systemic irregularities in the euro-Zone.

German Real and Nominal Retail Sales
Nominal Aug-11 Jul-11 Jun-11 3Mo 6Mo 12Mo YrAgo QTR SAAR
Retail Ex auto -3.0% 0.0% 3.9% 3.2% -2.5% 0.3% 3.8% 1.8%
Car Registrations (units) -1.2% 18.7% -15.9% -5.3% -4.2% 15.0% -30.0% 0.0%
Real Aug-11 Jul-11 Jun-11 3-MO 6-MO 12-MO 3.8% SAAR
Retail Ex auto -2.9% 0.3% 4.0% 5.1% -2.6% -1.0% 2.9% 3.9%
Other Early Reporters
UK Nominal 0.0% 0.8% 0.3% 4.6% 3.0% 4.7% 2.3% 3.1%
UK real -0.2% 0.2% 0.7% 2.6% 1.3% 0.1% 0.8% 0.7%
Spain Retail XAuto -1.5% 2.1% -2.5% -7.3% -5.8% -2.6% 0.7% -5.2%
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