German Retail Sales Sour

Retail sales in Germany fell unexpectedly in June by 1.2% after gaining 1% in May. With data for the quarter now complete, retail sales ex- autos are rising at a 1.9% annual rate in the second quarter in Germany. Car sales, or registrations as they are accounted for in Europe, rose 14.1% in June rebounding from an 11.6% drop in May. For the quarter registrations are down at a 4.2% annual rate. Inflation-adjusted German retail sales ex-autos fell 1.5% in June following a May rise of 0.7% and on this basis real retail sales excluding autos are falling at a 0.1% annual rate in the second quarter.

Retail sales data don't always conform to the notions of how well economies are doing. As we look across the euro-Zone we find a great deal of variability in retail sales and for the moment there are some surprises. The UK an EU member country not a common currency zone adherent sees real and total nominal retail sales each up by 0.2% in June. In the completed quarter nominal UK retail sales are rising at a 7.2% annual rate while real sales are rising faster and 7.7% annual rate. Spain saw real sales rise by 3.4% in June following two flat-to-weak months of data. But in the recently completed second quarter sales are rising in real terms at a 21.7% annual rate, a strikingly strong pace of increase, especially for this weak economy. Portugal, too, is posting strong retail sales. In real terms Portuguese sales are even more consistent than in Spain rising 1.1% in June, 1 .6% in May and 0.8% in April. Portuguese real sales in the second quarter are up at a 15.2% annual rate. Italy has not yet reported sales for June; real sales in May were flat; with two months data in hand, Italian real sales in the second quarter are flat.

While Germany dominates the euro-Zone in terms of many measures, not the least of which is the strength of its consumer confidence indicator, the performance of German retail sales is not nearly so striking. The German consumer apparently is able to feel a lot better without spending a lot of money unlike in the rest of Europe.

Still, the news from the euro-Zone seems to be that the expansion is still in place The German economy is doing better for the moment than retail sales appear to be doing but the June drop doesn't signal any reversal in the German trends. German unemployment reported today drops again and is holding near a two decade low. At least the EMU-wide unemployment rate is off-peak, coming in at 12.1% in June the same as the now downwardly revised rate for May.