Surveys of the eurozone’s third-quarter performance have so far been disappointing. After a surprisingly strong first half, the economy shows no signs of further acceleration. In fact, the economy appears to be slowing down slightly. This would be a disappointing recovery after a long period of stagnation.
The first concrete data for the quarter is today’s retail sales numbers, and they aren’t particularly encouraging. Retail sales are gradually bottoming out after a significant post-pandemic adjustment, but there is still no evidence of a full-fledged recovery. Retail sales in July increased by 0.1%, but are still 0.3% below May’s statistics.
Retail sales have been hit by the resumption of services after the pandemic and by the decline in real incomes of Europeans who have been restricted from spending on goods. Although the effects of reopening the economy are fading and real incomes are recovering, there are still no signs of a recovery in the retail industry. This also limits commodity inflation expectations, despite recent increases in input costs.
A first look at consumer trends in the third quarter suggests little hope for an unexpected surge in household consumption. Perhaps the Olympics gave a boost to French consumption, but don’t expect any big surprises there. Today’s weak sales indicate the weakness of the economic growth environment in which the euro area currently finds itself.
