Analysis: EMU Retail Sales Fell More Than Expected In October

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Real, seasonally adjusted retail sales:

Oct preliminary: -1.2% m/m, -3.6% y/y

MNI survey median: -0.3% m/m, -0.2% y/y
MNI survey range: -1.0% to flat m/m

Sept revision: -0.6% m/m (-0.2%)
August revision: -0.2% m/m (+0.2%)
July revision: +0.1% m/m (-0.1%)
June unrevised: +0.2% m/m (+0.1%)
May revision: +0.8% m/m (+1.0%)

PARIS (MNI) – Eurozone retail sales retreated more than expected in
October, weighed down by marked declines in Spain and especially
Germany, according to seasonally adjusted estimates released Wednesday
by Eurostat.

The 1.2% monthly drop to an eight-year low left sales volumes 3.6%
lower on the year and 1.6% below the 3Q average, which had recovered by
just 0.1% from a 0.8% decline in 2Q.

Sales of food, drink and tobacco fell 0.8% in October, while
non-food sales excluding motor fuel dropped another 1.4% after a 1.1%
downturn in September.

After surprising resilience during the summer, retail sales are
likely to remain on the downward trend that has prevailed since the
start of last year, reflecting the pressure on household revenues from
job losses and rising taxes and, in the bailout countries, from nominal
salary cuts and a compression of social spending. Belt-tightening has
been even more pronounced for major purchases like autos and homes.

Households may be able to protect living standards somewhat by
further drawing on financial reserves, as was the case in 2Q when their
savings rate declined another 0.2 point to 12.9%, the lowest level since
Eurostat’s series began in 1991.

Since 2Q, consumers polled by the European Commission have foreseen
a greater decline in savings for the coming year. At the same time, they
have become more worried about future finances and especially job
prospects, and they intend to retrench further on major purchases.

Retailers, in any case, remain pessimistic about the near term,
though less so than in October. Apart from Estonia and Slovakia,
expectations are now well below average in all countries, including

The November retail PMIs flagged declining sales in France (48.8)
and especially Italy (35.5), while Germany was nearly flat (50.2).

Even in Germany, where consumer sentiment is still holding up well
and expanding employment and rising wages should stimulate consumption,
retail sales have been disappointing. October brought a big downside
surprise with a 2.8% plunge that left sales 3.8% lower on the year.
Retailers polled by the Ifo institute in November confirmed the
deterioration of recent business, but they were less pessimistic about
medium-term prospects.

In France, sales volumes edged up 0.4% in October, retracing the
decline in September to stand 0.7% higher on the year. Yet the solid
1.7% gain in 3Q is unlikely to be repeated, as unemployment is soaring
and inflation and taxes are undermining household revenues. Insee
expects only marginal spending gains in the second half as households
draw down savings further. The average full-year rise would be 0.2%, as
in 2011.

The situation looks far worse along the southern flank of the
Eurozone, where fiscal consolidation is taking a much heavier toll. In
Spain, sales fell another 1.2% after the 4.7% downturn, when the
three-point VAT hike took effect in September, and they were 11.5% lower
on the year.

In Portugal, sales contracted 4.5% after a 4.4% downturn in
September and were 6.7% lower on the year. The latest results for Italy
and Greece showed annual declines in September of 0.6% and 12.1%,

In all these countries, consumers are particularly worried about
economic and labor market prospects and intend to keep a tight rein on
major purchases in the coming year. Not surprisingly, retailers’
expectations remain at very weak levels despite the recovery in Spain in

Apart from France, only three countries reported sales gains in
October: Ireland (+1.9%), Belgium (+0.7%) and Luxembourg (+0.6%).
Monthly declines were modest in Malta (-0.4%) and in Austria and
Slovakia (both -0.2%), but hefty in Finland (-3.0%) and Slovenia and
Estonia (both -1.7%).

Annual gains in October were limited to Belgium (+1.0%), Ireland
(+4.2%), Estonia (+6.4%) and Luxembourg (+7.0%). The steepest decline
after Spain and Portugal was in Slovenia (-6.7%).

–Paris newsroom +331 42 71 55 40; email:



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