Economy in Brief

Sales in the European Monetary Union rose by 0.3% in January after falling by 1.7% in December and rising by 0.7% in November. Sequential growth rates, however, still show sales withering at an increasingly weak pace.

Sequential sales show a 12-month decline rate of -2.4% that steps up to -2.6% over six months when annualized and again to -2.8% annualized over three months. On a quarter-to-date basis and calibrating the January sales level as a growth rate over the fourth quarter average, real retail sales in the euro area are falling at a 3.7% annual rate.

It has generally been a period of weakness for retail sales in the euro area. The chart shows separate retail and auto sales trends plotting sales levels rather than growth to highlight actual performance. At one point, auto sales had recovered and began to expand more or less on trend. But that expansion ran out of gas late in 2021. The level of real sales continues to move lower in the euro area. Currently EMU total sales volumes are higher than they were in January 2020 before COVID struck by only 2%. Food & beverage sales, that tend to be more stable, saw declines over 12 months, 6 months, and 3 months, but they are declines of diminishing intensity. Food & beverage sales are even increasing on a quarter-to-date basis in January. However, the volume of food & beverage sales is lower by nearly 1% than it was in January 2020, a testament to the current degree of weakness in sales in the euro area.

Country by country trends in key early reporters At this early date, the large European Monetary Union members have not reported separate figures, but the monetary union reports an aggregate based on whatever early estimates it has been able to make and by other early reporting members.

Among the seven countries that report in the table, only the Netherlands and Portugal report sales increases over 12 months, 6 months, and 3 months. The Netherlands reports accelerating sales on that timeline with sales expanding by 0.3% over 12 months, at a 4.5% annual rate over 6 months, and at a very strong 17.1% annual rate over 3 months. Denmark reports sales accelerating as they dig out of a hole from a decline rate of -5.5% over 12 months, at a -2.6% annual rate over 6 months and finally rising at a 1.5% annual rate over 3 months. Similarly, Sweden shows sequential improvement but doesn't get sales into positive territory with growth at -7.1% over 12 months, at a -3.8% annual rate over 6 months, and then at a -0.4% annual rate over 3 months. Interestingly, none of the reporters in the table show sales on a continuing decelerating path; however, there's still substantial weakness being reported from Belgium, Sweden, Norway, and the U.K.

Quarter-to-date sales show sales increases in Netherlands, Denmark, and Portugal. Their quarter-to-date declines in sales reported from Belgium, Norway, the U.K., and Sweden.

Sales volumes gauged in total from the January 2020 date before COVID struck show sales up by 3.5% in the Netherlands, by 2.9% in Portugal, by 1.4% in Norway, and barely higher gaining 0.2% in Denmark. However, in Belgium, the U.K. and Sweden, sales are lower in January 2023 than they were in January 2020.

The performance of motor vehicle registrations (sales) is a bit of a counterpoint, but it doesn't change the general picture or tone of weakness in consumer spending. Motor vehicle sales fell by 4.4% in January after falling 0.6% in December. The pace for motor vehicle sales for 15 economies in the European Union shows a 12.6% gain over 12 months, a stronger 29.7% gain over 6 months, and then a much weaker 6.1% gain over 3 months. These contrast with overall retail sales that show declines and even declines that are decelerating over that timeline. While auto sales are showing sporadic growth they are certainly not accelerating. And according to date basis, motor vehicle sales are much weaker than retail sales falling at a 15.3% annual rate QTD and vehicle sales are lower by 19.1% compared to what they were in January 2020.

Low and stable unemployment The unemployment rate in the European Monetary Union (EMU) in January stands at 6.7%, the same place it stood in December and has stood for three months in a row and in nine of the last 10 months. That is excellent stability. If we rank the level of the unemployment rate since the mid-1990s, the level of the unemployment rate has been lower in the EMU only about 3.2% of the time. That marks this rate as exceptionally low.

Are trends deteriorating? However, there's evidence that some of the strength, as well as the trend improvement, in the labor market are losing momentum in January. Of the 12 monetary union countries that report in the table, only two show lower rates of unemployment in January compared to December. In December, three countries showed lower rates of unemployment month-to-month. In November, there were four countries that logged lower rates of unemployment than the month before. The tendency for unemployment rates to fall is diminishing.

In January, there were six countries for which the rate of unemployment increased month-to-month. This compares to three countries that had that characteristic in December, and five in November. So far, the increases in unemployment rates month-to-month have been small or have occurred in countries with small labor markets. They have not changed the trend or overall level of the rate turning by upward for the EMU-wide unemployment rate.

Broader, sequential trends Looking at the broader data over three months compared to six months, four countries show declining rates of unemployment compared to six showing increasing rates of unemployment. Comparing the six-month change in unemployment to the change over 12 months, five countries show lower rates of unemployment over 6 months compared to 12 months and six countries show higher unemployment rates over 6 months compared to 12 months. Comparing the changes over 12 months to the changes that occurred over 12 months a year ago, we find that unemployment rates are lower in six countries on this basis and higher in six countries on this basis – a standoff. The overall rate for the European monetary system shows a decline of 0.2 percentage points over 12 months, an unchanged performance over 6 months and an increase in the unemployment rate by one tenth of one percentage point over 3 months.

Unemployment progress has a long track record of success The overall unemployment rate, as noted above, is still extremely low; the EMU-wide unemployment rate compared to January 2020 before COVID struck is now a half a percentage point lower. Only four of twelve countries have higher unemployment rates today compared to January 2020. Looking back from the mid-1990s, only two countries in the table have unemployment rates that are above their historic medians on that timeline; and those are Austria and Luxembourg. Meanwhile, four countries have unemployment rates that rank lower less than 10% of the time that mark them as countries with extremely low rates of unemployment (Germany, France, Ireland, and the Netherlands).