Retail sales, a key measure of consumer demand, in the Euro Area continued their downward trend in September, decreasing by 0.3%. This marks the third consecutive month of decline, surpassing the market's expectation of a 0.2% drop. The persistent challenges to consumer demand are primarily attributed to high inflation and elevated borrowing costs (high interest rates), which have reached multi-year highs.
The decline in retail sales was primarily driven by a substantial decrease of 1.9% in both physical and online sales of non-food products compared to August. Additionally, automotive fuel sales dipped by 0.9%.
Sales of non-food products saw their most significant drop since June 2022, with online trade also falling by 1.9%. Fuel sales contracted for the fourth consecutive period, declining by 0.9%. Conversely, sales of food, drinks, and tobacco experienced a notable increase of 1.4%.
Among the largest economies in the Euro Area, Germany (-0.8%) and Italy (-0.4%) recorded their fourth consecutive month of declining trade, while the Netherlands saw a third consecutive month of decline (-0.8%). In contrast, France (0.4%) and Spain (0.2%) reported increased sales.
This decline in retail sales intensifies concerns about the possibility of a recession. In conjunction with the recent GDP data, which revealed a 0.1% contraction in the euro zone economy during the third quarter, these latest retail figures underscore the deteriorating economic conditions in Europe. The weakening economy is primarily attributed to high interest rates, a persistent cost-of-living crisis, and reduced demand from the global economy.
Furthermore, there is growing speculation that the euro zone may enter a technical recession, characterized by two consecutive quarters of negative growth, in the latter half of 2023.
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