Title: Euro zone retail sales drop more than expected in June as prices rise

Aug 03, 2022 05:18AM ET

By: AnalysisWatch

On Wednesday, data showed that retail sales in the euro area fell more than expected in June as factory gate prices continued to rise, a signal of weak consumer demand that could lead to a recession in the second half of the year.

The European Union's statistics office, Eurostat, said retail sales volume in the 19 countries that share the euro, now adjusted for inflation, fell 1.2% month-on-month in June, and is down 3.7% year-on-year.

Economists polled by Reuters had expected unchanged monthly sales and only a 1.7% annual decline.

The drop in retail sales, which is a proxy for consumer demand, comes at a time when producer prices rose 1.1% m/m in June, on a 35.8% y/y rise, Eurostat said, signaling more upward pressure on consumer inflation and a slowdown in demand.

Although the Eurozone economy grew more than expected in the second quarter, economists said the expansion was probably the last hurrah before a likely recession in the second half of the year.

They said the economy would suffer because of a sharp rise in prices, driven mainly by high energy costs caused by Russia's invasion of Ukraine and problems in the global supply chain.

Eurostat data showed that energy prices in June were almost double the level of 12 months earlier, but even if they were excluded, producer prices were still 15.6% higher year-on-year in June—an increase that is sure to affect consumer spending power.

The biggest fall in retail demand was in non-food items, excluding motor fuel, especially via mail order and the internet, where they fell 12.5% year-on-year, Eurostat said.

Europe's largest economy, Germany, saw the biggest year-on-year decline in retail sales at 8.8%, while the third largest, Italy, also saw a 2.8% year-on-year drop.

The second largest country, France, still managed to post a 0.6% y-o-y increase.

Retail sales also fell by 6.1% y-o-y in the Netherlands, by 4.8% in Austria, by 8.8% in Ireland and by 4.5% in Finland.