Eurozone retail sales leapt in November even though unemployment remained at a record high, hinting at a pick up in consumer demand that would ease deflation worries and relieve pressure on the ECB to loosen policy…
Eurozone retail sales leapt in November even though unemployment remained at a record high, hinting at a pick up in consumer demand that would ease deflation worries and relieve pressure on the ECB to loosen policy.
Data on Wednesday showed the biggest monthly jump for 12 years in retail sales, a proxy for household demand that has been weakened across the bloc by high rates of unemployment.
The improvement came even though record joblessness persisted, with 12.1 percent of the bloc’s labour force out of work for the eighth month in a row in November. Data on Tuesday had shown a surprise drop in eurozone inflation to 0.8 percent in December, well below the European Central Bank’s target of just under 2 percent. It was the third month in a row in which the reading was below 1 percent, a level the ECB, which holds its monthly monetary policy meeting on Thursday, considers a danger zone for deflation.
“Today’s eurozone data releases provide some ammunition for the hawks on the ECB’s governing council in making the case against further easing measures at tomorrow’s ECB policy meeting,” said ING Bank economist Martin van Vliet. But he added: “With a sustainable recovery not yet assured — this is still very much a jobless recovery — ECB President Draghi, in his press statement, will likely keep the door to further easing wide open.” Retail sales in the 17 countries using the euro rebounded 1.4 percent in November after a 0.4 percent decline in October, the fastest monthly increase since November 2001. Compared with the same period last year, the volume of sales rose 1.6 percent after a 0.3 percent fall in October, delivering the strongest rise since February 2008. The number of people out of work in the eurozone was 19.241 million, 4,000 more than in the previous month, the European Union’s statistics office Eurostat said. Unemployment was lowest in Austria, at 4.8 percent, and Germany, at 5.2 percent, while the highest rates of joblessness were in Greece, at 27.4 percent, and Spain at 26.7 percent. The number of people out of work in Europe has been rising since 2011. The European Commission said on Wednesday that in addition to national reforms, the 28-nation EU had to integrate further economically, fiscally and politically to address the problem. “Without these further steps uncertainty could return sooner than we think and today’s recovery could quickly dissipate,” European Commissioner for Employment, Social Affairs and Inclusion László Andor wrote in a comment to the data. Retail sales rose strongly in the eurozone’s two largest economies, Germany and France, by 1.5 and 2.1 percent respectively, despite a deterioration in French consumer and businesses morale in November. Sales continued to improve in Portugal, up 3.1 percent on the month, the strongest in entire eurozone, and in Spain, where retail sales rose 1.9 percent.
“Strengthening consumer confidence and the help to purchasing power coming from muted inflation across the eurozone will increasingly underpin consumer spending and help economic activity to gradually gain momentum as 2014 proceeds,” said Howard Archer, economist at IHS Global Insight.