Real, seasonally and workday-adjusted retail sales:

July: +0.1% m/m, +1.1% y/y

MNI survey median: +0.2% m/m
MNI survey range: -0.5% to +0.6% m/m

June: +0.2% m/m (revised from flat)
May: +0.5% m/m (revised from +0.4%)
April: -0.9% m/m (revised from -1.0%)
March: +0.8% m/m (revised from +0.7%)
February: flat m/m (unrevised)
—

FRANKFURT (MNI) – Eurozone retail sales rose in July for the third
consecutive month, though by less than generally expected, as growing
food sales more than offset a decline in non-food turnover, Eurostat
reported Friday.

The four previous months were revised upward.

On the month, retail turnover gained 0.1% to give an annual figure
of +1.1%. Taking into account upward revisions to figures from March to
June, July’s sales were up 0.4% compared to the second quarter, which in
turn was unchanged versus 1Q.

The gain from June to July was entirely due to food, drink and
tobacco sales, which rebounded 0.3% on the month and were 1.4% higher
than in July 2009. Conversely, non-food sales fell 0.1% after two
consecutive months of growth, narrowing the annual increase to +1.8%.

Retailers said their business situation improved further in August
and continued to expected slightly above-average conditions in the near
term, according to the European Commission survey.

By contrast, Markit Economics’ retail purchasing managers index
dipped below the threshold for growth in August, as firms polled
reported declines in sales for August, thus placing “a question mark”
over how sustainable the recovery in consumer spending is, said Markit
senior economist Trevor Balchin said.

Private consumption regained some vigor in 2Q with a 0.5% rise.
Since then, consumer confidence has improved as economic concerns have
receded and unemployment fears have slipped below average, according to
the European Commission.

Yet with unemployment still high, wage gains should remain
sluggish, which will dampen consumers’ purchasing power. If the economic
upswing loses steam as global demand wanes and fiscal austerity measures
come into play, consumers could well revert to retrenchment.

Among the larger Eurozone states for which data were available,
only France saw an increase from June, with sales rebounding 2.2% to
their highest level since at least 1995. On the year, sales growth
accelerated notably to +6.1%, the strongest jump since December 2001.

Despite the significant recovery, consumer confidence has eroded
since the start of the year and buying-propensity remains well below
average, according to Insee. Retailers surveyed in July said recent
activity had slowed and they expected this trend to continue in the near
term. Their assessment for the sector as a whole remained “fairly
pessimistic,” the statistics office commented.

In Germany, sales slipped 0.3% on the month, mirroring June’s slide
and cutting the annual increase to +0.8%.

While consumers’ willingness to spend remains at above-average
levels, according to the GfK Group, Markit Economics’ latest retail
purchasing managers index (PMI) suggested further contraction in
turnover for August, with the indicator slipping to a below-average
48.4.

However, the outlook for September remains positive, the PMI report
noted, with 25% of respondents expecting sales to beat initial
forecasts.

“Retailers appear increasingly confident that growth in the wider
economy will support domestic consumption,” Markit economist Tim Moore
said following the better-than-expected 2Q GDP report out of Germany
late last month.

Italian data for July are not currently available. ISAE’s August
survey showed consumer sentiment falling to its lowest level since April
2009, while propensity to spend slipped to a 20-month low.

Reflecting the growing pessimism among Italian consumers and
“muted” overall consumer spending, retailers in Italy polled by Markit
reported further sales declines in August, extending the run of
decreases to seven months.

After the increase in VAT in July, Spanish retail sales plummeted
3.0% on the month to their lowest level in nearly nine years, resulting
in an annual decline of 4.2%, the sharpest fall recorded since November
2009.

Furthermore, with seasonally adjusted unemployment rising yet again
in Spain and the outlook for near-term employment looking bleak, it
appears likely that consumption will weaken once again, leaving retail
sales anemic for an extended period.

— Frankfurt bureau: +49 69 720 142; e-mail: frankfurt@marketnews.com —

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