Euro Macro: Retail sales depressed by higher energy prices, but overall consumption robust – The volume of retail sales in the eurozone declined by 0.2% mom in August, which was weaker than the consensus forecast of a 0.2% rise. Moreover, the July number was revised lower from a 0.2% decline to a 0.6% decline. The details of the report show that the weakness in July and August was concentrated in sales of automotive fuels in specialised stores, which dropped by more than 2% during the two months combined. The sharp rise in fuel prices since March of this year (up by 8% in total between March and August) obviously was the driving factor behind this slowdown in fuel sales. Besides fuel sales, food sales were also depressed during the two summer months. As price changes did not play a major role here, the weakness probably was due to weather and holiday factors. Indeed, the less volatile year-on-year change in food sales came in at 0.9% in August. Excluding energy and food, core retail sales were roughly stable on a monthly basis in July and August, with the year-on-year growth rate ending up at 2.9% in August.
Despite the energy price-related weakness in retail sales during the summer months, we think that total private consumption expanded solidly during the third quarter, and probably even picked up slightly from the 0.2% qoq growth rate of Q2. Indeed, new car registrations surged by almost 20% mom in August and even significant payback in September would still result in a rise in car sales in Q3 compared to Q2. More fundamentally, consumption should continue be supported by a further rise in employment, a pick-up in wage growth the low level of interest rates and the recovery in the housing market. (Aline Schuiling)