Eurozone retail sales unexpectedly decline in September

Eurozone retail sales fell unexpectedly in September, with shoppers in Germany staying at home and overall weaker non-food sales as the fourth wave of the coronavirus pandemic hit the continent.
According to preliminary data from Eurostat, the seasonally adjusted volume of retail trade dropped 0.3% month-on-month. On a year-on-year basis, retail sales were still 2.5% higher. Analysts had expected retail sales to increase roughly 0.3% from August’s upwardly revised 1.0% increase.

Based on available data, the largest monthly falls in total retail trade volume were in Germany, down 2.5% year-on-year, Finland, 1.9% weaker, and the Netherlands, 1.2% softer.

The decline comes as the World Health Organisation branded Europe as the new epicentre of the Covid-19 pandemic and rising inflation rates across the EU that have impacted consumers’ purchasing ability.

Pantheon Macroeconomics’ Melanie Debono said: “While EZ retail sales rose less in Q3 than in Q2, when they increased by 3.9%, we still think household consumption growth accelerated in Q3 and that it provided the main thrust for the 2.2% rise in EZ GDP.

“After all, retail sales account for less than half of total household spending and already-available national GDP data breakdowns suggest that other types of consumption, namely on services, jumped in Q3 as restrictions were eased, the travel sector re-opened, consumer confidence improved, and the labour market recovery continued apace.

“Looking ahead, household consumption growth will slow in Q4; we currently look for consumption growth of 0.6% quarter-on-quarter, after a probable 4.5% increase in Q3. That said, the recent surge in virus cases, especially in Germany, suggests spending growth may slow quicker than this, especially if it weighs heavily on consumer confidence which already deteriorated in October.”