Retail Sales Continue to Sag as Auto Registrations See Stimulus

Retail sales fell again in September in the e-Zone. Retail sales and vehicle registrations are on nearly opposite paths. Sales are still falling while vehicle registrations bolstered by an assortment of government programs have been spurred higher. All this stirs the pot of controversy since in the EU Commission indices that describe the various EMU sectors, consumer confidence and retailing tend to show the highest relative scores. Based on the EU surveys it would seem that consumer attitudes and retailing are leading EMU ahead, yet in terms of the hard data on spending that matter most that does not seem to be true.

Partly this divergence is a question of looking at levels of Vs changes. The levels of satisfaction assessed for the consumer and retailing sector surveys by the EU Commission are high relative to other sectors (though still low in absolute terms). For MFG and even services the relative levels of the indices compared to normal times are extremely low, but theses sectors had fallen hard in recession and are now rising, or rising strongly as is the case with MFG and despite their low ratings they are boosting growth the most.

So far European recovery seems to have come on the back of the industrial sector with rising output and orders but from an extremely low level. But with the euro currency also rising in value Vs other currencies, much of this demand seems to have been foreign-sourced thus questioning how far Europe can go without participation from its own consumers. The string of declines in retail sales raises that question again. It may be that the auto incentive schemes have diverted some spending from retail sales. But the European recovery cannot be based simply on selling autos and exporting. We continue to look for life in retailing to give optimism to the view of a sustained euro-recovery.