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Economy in Brief

EU Retail Sales Turn Lower Except for UK
by Robert Brusca  February 3, 2012

EMU retail sales fell by 0.4% in volume terms in December marking their second straight drop. While there has been some welling up in confidence over Europe, Europe remains in a very difficult spot. Its troubled economies are really troubled and some of them are going to have real difficulty digging themselves out. The EMU strong-countries are still growing but are looking more beleaguered. The PMI data have stabilized a bit at year-end but these diffusion readings are sensitive and after months of falling sharply it may not take much to put some bounce into them. With global export markets weak everywhere (except perhaps in the US) and with retail sales weakness in EU/EMU and with Europe very dependent on exports and intra-EMU cross border trade (trade which does not count as exports since these transactions are internal to EMU and all use the Euro) the risk to growth is still high.

Europe is not bringing any of its home-grown growth to the party and that is one reason to remain very skeptical on prospects. Global growth is unlikely to fire up the EMU/German export machine. Since Germany is so much more competitive than everyone else in the zone, it will get the lionís share of even the table scraps available in EMU. But EMU is not creating all that much growth. A large share of next to nothing or of Ďlessí is still not Ďmuchí. It wonít be enough for Germany

Zone-wide retail sales growth rates are negative over three-months, over six-months and over 12-months. The three-month growth rate is eroding faster with the pace at -2.6% at an annual rate.

German retail sales are weakening. French and Italian sales are weak. The UK oddly has some sort of a pick-up in gear. It also has some very weak monetary growth and still stubborn inflation. But the UK pick up is in volume terms itís not in nominal terms. Still, this money supply/inflation situation in the UK implies that there is a load of work left for UK policymakers. And when policymakers have a lot of work left to do there is a lot of risk.

Europe is still a tough region to love. Even if its political stresses were not so intense it would be facing a very difficult dilemma. Retail sales trends suggest that it does not have enough growth to sustain itself. Weakness in the rest of the world suggests external demand will not make up the difference. Ongoing weakness from Greece, to Spain, to Portugal, to Italy makes the burden of growth to borne by the rest of the zone all too heavy. While there is a new optimism welling up for Europe I canít bring myself to be part of it.

I am shifting my optimism to the US and my pessimism to Europe.

Euro-Area Retail Sales
  M/M SAAR
  Dec-11 Nov-11 Oct-11 3-Mo 6-MO 12-Mo
Zone Total Volume -0.4% -0.4% 0.1% -2.6% -0.4% -1.4%
Registrations:
Motor Vehicle Reg 5.2% -2.7% -4.1% -7.1% 15.0% -1.7%
NonFood Country detail: Volume
Germany Value -1.4% -1.0% 0.0% -9.3% -3.6% -1.0%
France #N/A -0.3% 0.3% -1.7% 3.5% 1.0%
Italy(Total; Value) #N/A -0.3% 0.2% -2.0% -2.0% -1.4%
UK(EU) Volume 0.7% -0.5% 0.9% 4.4% 3.0% 2.6%
Data in Shaded region are lagged by one month
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