Real, seasonally adjusted retail sales:

Oct preliminary: +0.4% m/m, -0.4% y/y

MNI survey median: +0.1% m/m, -0.9% y/y
MNI survey range: -0.3% to +0.5% m/m

Sept revision: -0.6% m/m (-0.7%)
August: +0.1% m/m
July: +0.2% m/m
June: +0.6% m/m
May revision: -1.1% m/m (-1.2%)
—

PARIS (MNI) – Eurozone retail sales recovered more than generally
expected in October on the back of solid gains in Germany and France,
Eurostat said Monday.

Taking account of the upward revision for September, the 0.4%
monthly upturn still left sales volumes 0.4% lower on the year and
little changed from the 3Q average, which was down slightly on the
quarter after a 0.3% decline in 2Q.

Sales of food, drink and tobacco edged up 0.2% on the month after
stagnating in September. Non-food sales excluding motor fuel bounced
back 0.5% after a 1.0% slide since July.

Retail sales had barely recovered from the economic slump before
they began heading south a year ago. Slowing inflation would normally be
promising for consumption in the near term. However, as economic
activity loses steam, the rise in unemployment since the start of 2Q is
accelerating, which will undermine consumer confidence and dampen wage
gains further.

Consumer confidence has withered rapidly in recent months owing to
eroding prospects for the real economy, European Commission surveys
show. While households’ buying propensity for big-ticket items is only
slightly below average, their outlook for the year ahead is close to
record lows.

Retailers polled by the Commission say business is deteriorating
rapidly. Their assessment of current turnover has plunged by more than
14 points since June to stand well below average in November. Their
outlook for the near term has eroded as well.

The latest joint forecasts from the French and Italian statistics
institutes and Germany’s Ifo think tank for Eurozone consumption growth
of 0.1% in 4Q and 1Q now look a bit optimistic.

The European Commission expects private consumption to grow by just
0.3% this year and next, before a pick-up to +0.6% in 2012. “Looking
ahead, economic indicators signal a continuation of weak consumption
growth in the near term,” it said last month.

In Germany, retail sales expanded by 0.7% in October to stand 1.4%
higher on the year. Stronger buying propensity boosted consumer
confidence in November and a further rise is expected in December,
according to the market research group GfK. With investment
opportunities uncertain, Germans are looking more to major purchases and
home buying, it noted.

In France, sales rebounded 0.8% from a half-point downturn in
September and were 3.8% higher on the year. However, declining outlays
for food and energy left overall spending on goods flat on the month,
according to national estimates. Rising taxes and cuts in social
services will inevitably weigh on consumption, even if the extra burden
has been placed largely on higher incomes to limit the impact.
Households enjoy a comfortable cushion of savings, but are unlikely to
draw on it as long as unemployment rises and economic prospects remain
clouded.

In Spain, sales dropped another 0.8% in October after a 1.6%
downturn in September and were 6.8% lower on the year. Given soaring
unemployment and public spending cuts, prospects for consumption are
bleak. Retailers polled by the Commission in November said current
business had weakened but were somewhat less pessimistic about future
prospects.

Current data were again unavailable for Italy. Results for
September showed sales volumes 3.4% lower on the year. Istat’s sentiment
indicator for large retail outlets fell further in November to the
lowest level in over two years, while morale among smaller retailers
retraced a part of the slide of past months. Prospects for the near term
eroded for both groups.

–Paris newsroom +331 42 71 55 40; email: ssandelius@marketnews.com

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