Euro Area Retail Sales Inch Ahead But Still Manage to Look 'Solid Enough'

It is odd how sales can be so weak and yet appear to be so firm. It a trick that retail sales in the EMU area seems to have been able to perform. Real sales are up by just 2.4% over 12 months and just 2.2% for nonfoods. Yet, three-month, six-month and 12-month growth rates for both series are all positive and the recent three-month growth rate is accelerating to over a 3% pace for each series. In the quarter-to-date (an early concept in April), retail sales are up at a 2.5% annualized pace even though vehicle registrations seem to be in trouble, falling sharply in April and plunging in the quarter-to-date.

Across the EMU and in Europe, retail sales seem to be on something like cruise-control. The pace is rarely very hot and there is no evidence of sales about to stall. Sales look their weakest over six months a venue over which EMU-wide sales volumes slip to under a 1% pace and Spain logs a sales drop along with Austria. The non-EMU nations of Denmark and the U.K. also experience a sales decline over six months.

But across the EMU, sales are up by 0.9% or more everywhere except in Austria when sales, while falling over 12 months, are actually on a consistent improving path over shorter horizons. The pace of sales across countries on a quarter-to-date basis ranges from 1.8% in Germany to 11.9% in Spain and in the UK - omitting Austria. Austria has the unfortunate problem of logging a sharp sales decline in April which has driven its quarter-to-date retail sales growth rate deeply into negative territory. However, its 6.2% plunge in April follows a 5.2% rise; thus, Austria seems to be caught in a period of volatility more than weakness, but time will make that clearer.

The only really troubling trend in the table of retail sales and auto registrations is the recent performance of auto registrations. That series is often volatile, but it is also sharply lower in April after swinging widely down then up in February and March. The U.S. is also starting to see some prevarication in its own auto sales after autos have strongly driven U.S. retail sales gains. I know of no connection between European registrations and U.S. sales and in fact U.S. sales have a number of very local peculiarities that are nagging at sales stemming from excess and bad lending practices to an outsized number of vehicles coming off lease to compete with new car sales. But like the U.S., Europe has seen a strong and steady revival in vehicle registrations that may no longer be so compelling moving forward for some of the same reasons stemming from demographics to the catch up of sales to past demand.

For the moment, Europe's retail sales are looking consistent. They are not accelerating and do not appear to be strong in any fashion, but they do not seem threatened either. My best descriptor for them is 'consistent.' To keep growth on track in the EMU, sales are going to have to continue to expand. On these trends, that does not seem to be at risk.