Eurozone retail sales experienced a modest increase of 0.1% in July 2024, marking a recovery from a 0.4% decline in June. This data, released by Eurostat on Thursday, reflects ongoing challenges in the region’s consumer spending landscape.
Economists had predicted this slight uptick, which coincided with a 0.2% rise in retail sales across the broader European Union, also rebounding from a previous decline of 0.4%.
Year-on-year, the Eurozone’s retail sales index saw a marginal decrease of 0.1%, underscoring the persistent obstacles facing consumer expenditure. Conversely, the European Union enjoyed a 0.4% annual growth in retail trade volumes.
Sector Performance and Member State Highlights
July’s sectoral results varied significantly within the Eurozone. Sales for food, drinks, and tobacco rose by 0.4%, whereas non-food items, excluding automotive fuel, saw a 0.1% increase. However, automotive fuel sales in specialized stores fell by 1.0%.
These trends echoed across the European Union, with food, drinks, and tobacco sales climbing by 0.5%, non-food sales (excluding automotive fuel) gaining 0.2%, and automotive fuel sales dropping by 1.4% in specialized stores.
Among the member states, Croatia led the way with a substantial retail trade volume increase of 2.9%. Austria and Slovakia followed closely with 1.8% growth, while Slovenia recorded a 1.6% rise. In contrast, Luxembourg faced the most significant downturn with a 2.1% decline, trailed by Romania (-1.8%) and Cyprus (-1.1%).
Market Reactions and Impacts
Against this backdrop, the euro held steady at 1.11 against the US dollar, reflecting a 0.2% uptick on Thursday, the strongest position since late August. This strengthening of the Euro comes as traders anticipate potential interest rate cuts by the Federal Reserve, especially with the upcoming US employment report on Friday.
Speculation is rife regarding the magnitude of impending rate cuts. As indicated by the CME FedWatch tool, the probability of a 50-basis-point reduction at the Federal Reserve’s meeting on September 18 has risen to 41%, up from 34% the previous week.
The US jobs report is seen as critical, with expectations that a weaker-than-expected employment growth and an increase in the unemployment rate might intensify speculation for larger rate cuts.
In the bond market, European sovereign yields remained fairly stable. Germany’s 10-year Bund yield held steady at 2.22%, while the spread between Italian BTPs and Bunds tightened by 3 basis points to 1.37 percentage points. Meanwhile, the spread between Spanish Bonos and Bunds remained unchanged at 0.82 percentage points.
As for European equity markets, the performance was somewhat muted following a sell-off earlier in the week. The Euro Stoxx 50 index fell by 0.2% as of 11:15 a.m. Central European Time.
French and Dutch stocks showed slight losses, whereas Italy and Germany noted marginal gains. Spain’s IBEX 35 index stood out by rising 0.5%, buoyed by its banking sector’s performance.
Among notable stock movements, Dutch semiconductor equipment manufacturer ASML continued its decline, dropping 1.8% after a previous 5.9% fall linked to a downgrade from UBS. Other laggards included French luxury conglomerate LVMH, which fell by 1.8%, alongside Air Liquide and Essilor, which saw drops of 1.9% and 1.6%, respectively.
In contrast, utility stocks emerged as the top performers within the Euro Stoxx 50 index. Germany’s RWE surged by 3.8%, while France’s ENGIE climbed 1.8%.
Photo credit & article inspired by: Euronews
