Economy in Brief

Retail sales in the European monetary area fell in March by 0.1%, continuing a streak of declines in retail sales volumes since the beginning of 2026. Motor vehicle sales, however, as a separate category, showed recovery in registrations and sales from January to February to March.

Among six early reporting monetary union and other European countries, Germany and Norway showed sales declines in March, while Denmark, the Netherlands, the United Kingdom, and Sweden recorded month to month increases. However, these March data belie the weakness in February, when sales declined month-to-month in all six of these areas. Prior to that, January sales had increased month-to-month in all these countries except Germany; Germany posted a 1.1% decline in retail sales in January.

Sequential trends Sequential trends for these countries show that retail sales in Germany have been slipping more rapidly, falling 2% over 12 months, at a 3.9% annual rate of decline over six months, and at an accelerated 13.1% annual rate of decline over three months. Norway also has seen increasing weakness in retail sales, rising by 0.9% over 12 months, gaining at only a 0.4% annual rate over six months, and then falling at a 1.2% annual rate over three months. However, Denmark, the Netherlands, the U.K., and Sweden each show retail sales accelerating from their 12-month growth rate to their six-month growth rate and to their three-month growth rate. Only the Netherlands is an EMU member country. These data pool together monetary union and non-monetary union countries.

Looking at the headline for the monetary union, we see sales are clearly slipping and decelerating, with total sales volume up 1.1% over 12 months, up at a 0.2% annual rate over six months, and then falling at a 1.9% annual rate over three months. Sales in the monetary union are weak and getting weaker.

In the quarter-to-date (the now-completed first quarter), monetary union sales fell by 0.5% at an annual rate. Among the other countries in the table, only Germany—the largest economy in the monetary union—shows a quarterly decline at a 4.3% annual rate. All the other reporters in the table show increases, ranging from 0.1% at an annual rate in Norway to a 6.3% annual rate in the United Kingdom.

Looking at the sales gains back to January 2020, before COVID, in the euro area total retail sales volume is up by 6.3% over that broad period. U.K. sales volumes are actually lower by 0.6% over that same span. Germany, the largest euro area economy, shows a 2% increase since January 2020, implying a very slow gain for retail sales over that period. The strongest gains since January 2020 are logged by Denmark, with a 12% gain, followed by the Netherlands with a 6.4% gain and Sweden with a 5.6% gain. Since we're looking at a broad six-year period, on that time horizon these are all relatively weak numbers, with the exception of Denmark.

Activity in the monetary union has been weak, with the service sector having been quite weak during the period since COVID ended—especially on the back of the invasion of Ukraine by Russia. Recently, manufacturing and goods sector data have shown a little bit of life, even as service sector data continue to be very touch and go. We see that again in this retail sales report. Now oil prices are jumping, and there is a new ‘hot’ situation in the Middle East; the Strait of Hormuz is showing either impeded or shuttered traffic conditions. The outlook remains very uncertain. Consumer confidence measures continue to show consumers as somewhat off balance and concerned about circumstances and the outlook. This means we'll continue to watch all these trends closely. In the meantime, these retail sales trends indicate caution on the part of consumers as to their willingness to spend—even though they appear to have opened their pocketbooks to spend on vehicles in recent months and even sequentially. In context, the rebound in auto sales still leaves total vehicle registrations 5% lower than they were in January 2020—six years ago. There is nothing there to indicate that the consumer is out of the woods and back to normal.

In this week’s Letter, we take another pulse on recent key developments relating to, and affecting, Asia. The week has once again begun on a hopeful note, following reports that the US will guide neutral vessels through the Strait of Hormuz, signalling a partial easing of trade flows through the waterway. Asian markets, including South Korea and Taiwan, were further buoyed by persistent AI-related optimism (chart 1). A full tally of central bank decisions since February highlights a growing divergence across the region. While most central banks have opted to hold back on tightening, a subset has already moved to raise policy rates in response to inflation pressures stemming from higher oil prices (chart 2). A cross-country comparison of consumer inflation reinforces this divergence, with more pronounced CPI increases in economies such as Australia and the Philippines, where central banks have recently hiked rates (chart 3).

In the meantime, amid the absence of oil flows through the Strait, many Asian importers have begun sourcing supplies from alternative producers, including the United States (chart 4). At the same time, major oil exporters affected by disruptions in the Strait of Hormuz have been forced to scale back crude production significantly due to storage constraints (chart 5). Looking ahead, attention turns to a three-pronged week featuring regional PMIs, additional central bank decisions (chart 6), and further Q1 GDP releases.

Early-week optimism Asian markets began the week on an optimistic footing, supported by developments in the Middle East. Reports that the US will guide neutral vessels through the Strait of Hormuz have lifted expectations of a partial resumption in trade flows through what has been a severely constrained passage. That said, while any reopening of oil and broader shipping routes is a key factor in easing the supply shock stemming from the conflict, the situation remains far from resolved. Uncertainty persists over both the scale and durability of any recovery in shipping activity. Elevated tensions between the US and Iran—underscored by exchanges of fire as US forces escorted vessels through the waterway on Monday—continue to leave the outlook vulnerable to renewed disruption. Nonetheless, ongoing AI-related optimism has continued to underpin equity markets. Asia stands to benefit disproportionately given its central role in the global AI supply chain, helping keep equity prices elevated across key markets such as South Korea and Taiwan (chart 1).