Poor retail sales data highlight euro zone's consumption slump
Euro zone retail sales unexpectedly dipped in January, adding to signs that a long-predicted consumption-led recovery is not yet on the horizon, fresh data from Eurostat showed on Thursday.
Retail sales in the 20 nations sharing the euro currency dipped by 0.3% on the month, confounding expectations for a 0.1% rise, as non-food products and fuel sales both fell.
It was the fourth straight month of contraction or zero growth, and retail figures have been trending down for the past half year.
Consumption was widely expected to take off in the second half of last year as real wages finally caught up to levels before the inflation surge of 2022-2023.
But households are still choosing to save up their cash, worried that the relentless flow of negative news from trade tensions to Russia's war in Ukraine and an industrial recession could drag the bloc into recession and lead to massive job losses.
Those fears have been proven wrong so far as employment continues to rise to record highs but hours worked are falling and order levels in manufacturing remain low, denting confidence.
Among the bloc's biggest countries, Germany reported a small rise in retail sales, but France and Italy both recorded drops.
Retail sales rose by 1.5% compared with a year earlier, a slowdown from 2.2% a month earlier and also below expectations for 1.9%.
Weak consumption is a key reason the European Central Bank is all but certain to cut interest rates once again on Thursday and keep the door open to more monetary policy easing.
(Reporting by Balazs Koranyi; Editing by Hugh Lawson)
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Zawya
2 days ago
- Zawya
Shares and dollar tumble as tariff tensions flare
Stocks and the dollar fell on Monday as U.S.-China trade tensions bubbled and investors turned defensive ahead of U.S. jobs data and a widely expected cut in European interest rates. Shares in steelmakers, which export metal to the United States, dropped in reaction to President Donald Trump's threat late on Friday to double tariffs on imported steel and aluminium to 50%, starting June 4. The move drew criticism from European Union negotiators. Speaking on Sunday, U.S. Treasury Secretary Scott Bessent said Trump would soon speak with Chinese President Xi Jinping to iron out a dispute over critical minerals. Beijing then forcefully rejected Trump's trade criticism, suggesting a call might be some time coming. With tensions rising again over tariffs and trade, sentiment looked fragile in Europe, where the STOXX 600 fell 0.2% on the day and euro zone government bonds sold off, while the euro benefited from an investor push out of dollar holdings. "The flip-flopping on trade policy looks set to continue and it appears the uncertainty this creates does not bother President Trump at all. That is likely to give investors the reason to renew selling of the U.S. dollar," MUFG strategist Derek Halpenny said. The dollar has lost 9% in value against a basket of six major currencies so far this year. The index was last down 0.53% on the day at 98.83. White House officials also continued to play down a court ruling that Trump had overstepped his authority by imposing across-the-board duties on imports from U.S. trading partners. Investors will be watching for signs to indicate whether Trump will go ahead with the 50% tariff on Wednesday or back off as he has often done before. Safe-haven assets found plenty of demand on Monday, with the likes of the Japanese yen and Swiss franc staging a robust rally, as did gold. There was some speculation about what Ukraine's astonishing attack on Russian air bases might mean for peace talks resuming on Monday. In Poland, nationalist opposition candidate Karol Nawrocki narrowly won a presidential election, delivering a major blow to the centrist government's efforts to cement Warsaw's pro-European orientation. TARIFF TURBULENCE In U.S. markets, S&P 500 futures fell 0.3%, while Nasdaq futures lost 0.4%, suggesting a retreat at the opening bell later. The S&P had climbed 6.2% in May, while the Nasdaq rallied 9.6% on hopes that final import levies will be far lower than the sky-high levels initially touted by Trump. Front-running the tariffs has already caused wild swings in the U.S. economy, with a contraction in the first quarter likely turning into a jump this quarter as imports fall back. The Atlanta Fed GDPNow estimate is running at an annualised 3.8% for April-June, though analysts assume this will slow sharply in the second half of the year. Data this week on U.S. manufacturing and jobs will offer a timely reading on the pulse of activity, with payrolls expected to rise 130,000 in May and unemployment to remain at 4.2%. A rise in unemployment is one of the few developments that could get the Federal Reserve to start thinking of easing again, with investors having largely given up on a cut this month or next. A move in September is given an approximately 75% chance, though Fed officials have stopped well short of endorsing such pricing. Fed Governor Christopher Waller said on Monday that cuts remain possible later this year as he saw downside risks to economic activity and employment and upside risks to inflation from the tariffs. The Senate will this week start considering a tax-and-spending bill that will add an estimated $3.8 trillion to the federal government's $36.2 trillion in debt. Across the Atlantic, the European Central Bank is considered almost certain to cut its rates by a quarter point to 2.0% on Thursday, while markets will be sensitive to guidance on the chance of another move as early as July. The Bank of Canada meets Wednesday and markets imply a 76% chance it will hold rates at 2.75%, while sounding dovish on the future given the tariff-fuelled risk of recession there. On Monday, the dollar fell 0.9% on the yen to below 143 , and was down 0.6% to 0.818 Swiss francs. The euro was up 0.55% to $1.1412, around its highest since late April. In commodity markets, gold rallied 2% to $3,356 an ounce , having lost 1.9% last week. Brent crude oil rose by almost 4% to $65 a barrel after OPEC+ decided to increase output in July by the same amount as in each of the prior two months, a relief to some who had feared an even bigger increase. (Reporting by Wayne Cole; editing by Christopher Cushing, Jacqueline Wong, Kevin Liffey and Mark Heinrich)
Zawya
4 days ago
- Zawya
Ethiopia, IMF staff agree programme review that could unlock $260mln
Ethiopia and the International Monetary Fund have reached a staff-level agreement on the third review of the country's $3.4 billion loan programme from the lender, the Fund said on Friday. Once approved by the IMF's Executive Board, Ethiopia will gain access to another $260 million in financing. "The (Ethiopian) authorities' policy actions in the first year of the programme have yielded strong results. The transition to a flexible exchange rate regime has proceeded with little disruption," the IMF statement said. "Macroeconomic indicators have performed better than expected, with substantially better outcomes than forecast for inflation, goods exports and international reserves." (Reporting by Alexander Winning; Editing by Hugh Lawson)
Zawya
27-05-2025
- Zawya
Euro zone bond yields edge down on French inflation data, tariff concerns
Euro area bond yields dropped on Tuesday after French inflation data came in weaker than expected, while concerns about the potential adverse economic impact of U.S. tariffs persisted. Borrowing costs edged up on Monday as the U.S. backed away from its threat to slap 50% tariffs on European imports, before falling later in the session in the wake of U.S. Treasury market worries about the effects of erratic U.S. trade policy. French inflation fell to its lowest level since December 2020 in May, driven by a sharper decline in energy prices and a slowdown in service costs. Germany's 10-year government bond yield, the euro area benchmark, dropped 2.5 basis points (bps) to 2.54% after hitting 2.513%, its lowest level since May 8. U.S. stock index futures jumped on Tuesday after tensions between the United States and the European Union cooled, favouring some selloff in safe-haven bonds. On the euro zone front, markets await more inflation data from Germany, Italy and Spain on Friday. The normalisation of interest rates in the euro zone is probably not complete, European Central Bank (ECB) policymaker Francois Villeroy de Galhau said on Tuesday. However Austrian central bank governor Robert Holzmann, seen as a hawk, called for a pause in rate cuts until September. Markets price in a 90% chance of an ECB 25 bps rate cut next week. They also indicated a depo rate at 1.67% in December, which implies an additional easing move and an around 30% chance of a third cut by year-end. The depo rate is currently at 2.25%. Data showed that the euro zone economic sentiment improved in May. The benchmark 10-year U.S. Treasury yield was down 5 bps to 4.46% in London trade. Analysts mentioned a possible regulatory relief which could favour more demand for bonds, driving yields lower, and concerns about rising public deficit. Market participants expect U.S. regulators to revamp the "supplementary leverage ratio", reducing the amount of cash reserves banks must hold and encouraging them to play a larger role in intermediating Treasury markets. A tax and spending bill which would saddle the U.S. with more debt now heads to the Senate, with several senators saying they would seek substantial changes over what is likely to be weeks of debate. Italy's 10-year yield rose 0.5 bps to 3.56%, with the gap between Italian and German yields at 99.50 bps, after reaching 90.90 bps last week, its lowest level since March 2021. (Reporting by Stefano Rebaudo; Editing by Hugh Lawson)
