Eurozone retail sales ended the second quarter on a softer note - ING

Peter Vanden Houte, Chief Economist at ING, suggests that the Eurozone retail sales stabilized in June, though cheaper oil and stronger job creation should support consumption in the second half of the year.

Key Quotes

“According to Eurostat figures released today, Eurozone retail sales stabilized in June, after a 0.4% expansion in May. This was in line with the consensus estimate. Portugal and Spain saw the highest increases (+3.1% and +1.0% MoM respectively), while Germany recorded a 0.1% fall and in France retail sales contracted 0.4% on the month. Year-on-year retail sales expanded by 1.6%.

On average, retail sales grew 0.1% over the quarter after a 0.6% increase in the first quarter. The main culprit for the somewhat weaker consumption growth was most likely the 30% increase in oil prices over the quarter, sapping households’ purchasing power.

However, since July, energy prices have been weakening again, while July’s PMIs are also showing that job creation remains strong in the Eurozone. Even though Brexit might have a minor adverse impact on consumer confidence, we believe that the underlying fundamentals remain strong enough to support consumption in the second half of the year. That said, we don’t see any strengthening of the expansion in the near future with GDP growth likely to hover around 0.2% over the next few quarters, resulting in a 1.5% expansion for the whole of the year.”