Eurozone retail sales disappoint

Eurozone retail sales disappoint
By Stanley Pignal in Brussels
Copyright The Financial Times Limited 2010
Published: February 3 2010 12:25 | Last updated: February 3 2010 12:25
http://www.ft.com/cms/s/0/60412e10-10b6-11df-975e-00144feab49a.html


The economic downturn took its toll on Christmas spending in the eurozone, according to retail data which show December sales were even lower than the gloomy 2008 holiday period.

The European Commission’s retail sales index fell 1.6 per cent in December compared with a year earlier.

Adjusted for inflation, it is the lowest Christmas reading since 2005 and is the third consecutive year of lower December retail sales, after a 1.8 per cent decline last year.

The three successive falls mark the only declines in December retail sales since the creation of the euro in 1999.

Month on month, the ratio of sales is in line with recent months, despite hopes from many observers that encouraging economic news at the end of 2009 – when the eurozone officially returned to growth – would have filtered through into more sales.

Economists seized on the data as evidence of the bloc’s stuttering recovery, particularly after lacklustre figures for the end of 2009 from other surveys.

Jennifer McKeown at Capital Economics said: “This supports evidence from the industrial sector that the eurozone economy expanded at a slower rate than Q3’s 0.4 per cent gain – we expect a quarterly rise of about 0.2 per cent.”

An upward revision of the Markit January purchasing managers’ index in the services sector – up 0.2 points to 52.5 points – suggests, however, that the economy is in modestly better health at the start of 2010.

But the data add to a growing list of indicators that show a widening gap between the eurozone’s healthiest and weakest economies, according to Colin Ellis at Daiwa Capital Markets.

“We only have composite PMIs for a subset of euro-area economies, but there is a clear gap between the likes of Spain and Ireland, where activity is still thought to be contracting, and Germany and particularly France, where recovery now looks to be under way.”

The December retail data were not available for a clutch of countries, including Greece, which is struggling with a giant budget deficit and a crisis of confidence. However, in the past month data for the country suggests it is well below 2005 retail sales level in spite of having grown significantly in the years before the downturn.

“Core” eurozone economies fared better than the rest, with France in particular well above previous month’s spending.

Consumer surveys in January did show rising confidence, which usually filters through into retail spending, particularly as savings among households are high and inflation is low.

Unemployment in the eurozone is still rising, however, which typically means consumers unsure about their job prospects will delay purchases of “big ticket” items such as cars and white goods until their personal situation becomes more certain.