EMU Retail Sales Make Gains in September

Retail sales in the European Monetary Area rose by 0.4% in September after being flat in August and falling by 0.2% in July. Still, it's only a one-month reprieve and the outlook doesn't necessarily look that bright in the wake of this unexpectedly strong report that substantially rides on the back of a stronger German report. Germany that carries a very high weight in the European Monetary Union had a gain in retail sales on the month of 0.9%.

Sequentially, the growth of retail sales in the euro area falls by 0.3% over 12 months that transitions to a 2.1% decline over six months but then sales log a gain at a 1.1% an annual rate over three months.

Separately, motor vehicle sales rose by 2.1% in September after rising by an outsized, 19.2%, in August. Motor vehicle sales experienced explosive acceleration logging a 10.7% growth rate over 12 months, a 71.8% annual rate gain over six months and a 112.5% annual rate gain over three months. Computer chips are becoming available again and cars are being produced and sold. That's a major factor in boosting motor vehicle sales in the euro area area as well as in the United States and elsewhere.

Q3 sales data are complete This retail sales report marks the completion of retail sales in the third quarter. According to data statistics for this report are therefore completed third quarter statistics on a preliminary basis. Eurozone retail trade falls at a 2.9% annual rate in the third quarter with motor vehicle registrations up at about a 100% annual rate. In the quarter-to-date of the 6 early reporting European monetary union countries (Germany, Italy, Spain, Portugal, the Netherlands, and Belgium), there are quarter-to-date gains in sales for three of them. Italian sales are up at a 4.9% annual rate in the quarter-to-date, in Portugal sales are up at a 1.3% annual rate, and in Belgium they're up at a 0.8% annual rate. These gains contrast to a 4.2% annual rate decline in Germany, a 7.3% annual decline in Spain, and a 6.3% annual rate decline in the Netherlands.

The table also includes quarter-to-date sales for Denmark, an EU member, Sweden, Norway and the United Kingdom. Danish quarter-to-date sales are falling at a 5.3% annual rate, Sweden lags a nearly 17% annual rate fall, in Norway sales fall at a 7.7% annual rate. In the U.K., sales volumes fall at a 7.3% annual rate. Not only does the EMU headline show quarter-to-date decline, but the preponderance of retail sales data across European Monetary Union and non-monetary union members show sales falling in the quarter-to-date.

Lumping all the sales together, across the ten countries reporting in the table, finds only three show gains over 12 months; those three are EMU members Italy, Spain, and Portugal with Spain logging an increase of only 0.1%. Over six months there are increases in only 3 countries: Italy, Spain, and Belgium – all EMU members. Over three months there are gains in five of the ten reporting countries with one country Germany showing unchanged real sales over three months.

Sales since Covid came to town Looking at the gain in sales in the EMU since January 2020, before the COVID virus struck, sales have risen by 4.2% over that 33-month period. Despite recent strength, motor vehicle sales are still 15.2% lower than they were in January 2020. Sales growth has not been very strong in Europe, rising quickly after the drop-off during the Covid recession, then slowing abruptly.

Sales in Italy are up 6.7% over this period; in Belgium they are up 5.4%; in Norway sales gain 4.4%; in Germany sales rise by 3.5%; in the Netherlands sales are higher by 2.3%. Then Portugal, Denmark and Sweden show gains less than 2% each, while Spain and the U.K. log sales totals lower on balance over that period.

Retailing may be a bright spot this month. But it does not have good momentum or good fundamentals. With the energy picture in Europe so uncertain and with the ECB still fighting a too-high inflation and hiking rates, September could prove to be a Pyrrhic victory for good news on the retail sales front.