Eurozone consumers don’t act on lower confidence as retail sales increased - ING

Bert Colijn, Senior Economist at ING, suggests that the worthless start of the year for financial markets still has not impacted consumption in the Eurozone much as retail trade increased with 0.2% month-on-month and 2.4% year-on-year.

Key Quotes

“This surprised analysts as they had expected retail sales to have remained stable in February. This is the highest reading of retail sales since February 2008, which was the pre-crisis peak. Consumers talked the talk of lower confidence in recent months, but have yet to walk the walk.

Even though Eurozone consumers are wary of the global economic and political situation, the sharp downturn in consumer confidence over the past months is not yet having much of an impact on retail trade. Negative inflation has been enticing to consumers and stores are profiting. Besides that, the unemployment rate continued to decline in February, which is helping disposable income grow.

The months ahead could still be bleaker though as the labour market has lost a bit of its momentum in the first months of the year and today’s Eurozone service sector PMI indicated a slowdown of growth in March. This means that some weakness could still be ahead of us, but the current pace of sales growth is a good sign for the overall performance of the Eurozone economy in the first quarter.”