EMU Retail Sales Expand in January But Remain Weak on Trend

Sales in the European Monetary Union rose by 0.3% in January after falling by 1.7% in December and rising by 0.7% in November. Sequential growth rates, however, still show sales withering at an increasingly weak pace.

Sequential sales show a 12-month decline rate of -2.4% that steps up to -2.6% over six months when annualized and again to -2.8% annualized over three months. On a quarter-to-date basis and calibrating the January sales level as a growth rate over the fourth quarter average, real retail sales in the euro area are falling at a 3.7% annual rate.

It has generally been a period of weakness for retail sales in the euro area. The chart shows separate retail and auto sales trends plotting sales levels rather than growth to highlight actual performance. At one point, auto sales had recovered and began to expand more or less on trend. But that expansion ran out of gas late in 2021. The level of real sales continues to move lower in the euro area. Currently EMU total sales volumes are higher than they were in January 2020 before COVID struck by only 2%. Food & beverage sales, that tend to be more stable, saw declines over 12 months, 6 months, and 3 months, but they are declines of diminishing intensity. Food & beverage sales are even increasing on a quarter-to-date basis in January. However, the volume of food & beverage sales is lower by nearly 1% than it was in January 2020, a testament to the current degree of weakness in sales in the euro area.

Country by country trends in key early reporters At this early date, the large European Monetary Union members have not reported separate figures, but the monetary union reports an aggregate based on whatever early estimates it has been able to make and by other early reporting members.

Among the seven countries that report in the table, only the Netherlands and Portugal report sales increases over 12 months, 6 months, and 3 months. The Netherlands reports accelerating sales on that timeline with sales expanding by 0.3% over 12 months, at a 4.5% annual rate over 6 months, and at a very strong 17.1% annual rate over 3 months. Denmark reports sales accelerating as they dig out of a hole from a decline rate of -5.5% over 12 months, at a -2.6% annual rate over 6 months and finally rising at a 1.5% annual rate over 3 months. Similarly, Sweden shows sequential improvement but doesn't get sales into positive territory with growth at -7.1% over 12 months, at a -3.8% annual rate over 6 months, and then at a -0.4% annual rate over 3 months. Interestingly, none of the reporters in the table show sales on a continuing decelerating path; however, there's still substantial weakness being reported from Belgium, Sweden, Norway, and the U.K.

Quarter-to-date sales show sales increases in Netherlands, Denmark, and Portugal. Their quarter-to-date declines in sales reported from Belgium, Norway, the U.K., and Sweden.

Sales volumes gauged in total from the January 2020 date before COVID struck show sales up by 3.5% in the Netherlands, by 2.9% in Portugal, by 1.4% in Norway, and barely higher gaining 0.2% in Denmark. However, in Belgium, the U.K. and Sweden, sales are lower in January 2023 than they were in January 2020.

The performance of motor vehicle registrations (sales) is a bit of a counterpoint, but it doesn't change the general picture or tone of weakness in consumer spending. Motor vehicle sales fell by 4.4% in January after falling 0.6% in December. The pace for motor vehicle sales for 15 economies in the European Union shows a 12.6% gain over 12 months, a stronger 29.7% gain over 6 months, and then a much weaker 6.1% gain over 3 months. These contrast with overall retail sales that show declines and even declines that are decelerating over that timeline. While auto sales are showing sporadic growth they are certainly not accelerating. And according to date basis, motor vehicle sales are much weaker than retail sales falling at a 15.3% annual rate QTD and vehicle sales are lower by 19.1% compared to what they were in January 2020.

Summing up and perspective The performance of retail sales in the European Monetary Union is a continuing story of weakness. Conditions are sequentially weak if not deteriorating and quarter-to-date performance for the most part is weak if not deteriorating. The entire period since COVID struck has been showing weakness across the early reporting countries of the European Monetary Union of the European Union or simply other non-members in Europe. The best performance on this timeline is the 3.5% gain in retail sales in the Netherlands whose gain implies a gain of just a little more than 1% in real terms over each of the last three years. Portugal also posted a gain of 2.9% overall and Norway posted a gain of 1.4%. But after that, we're looking at quite dismal retail sales performance across this group of reporters. But the European Central Bank is still raising rates, and with inflation still high, prospects for consumer spending remain poor. The trends show that, on a quarter-to-date basis, sales appear to be showing weakness again.