In July 2017 compared with July 2016, the calendar adjusted retail sales index increased by 2.6% in the euro area and by 2.7% in the EU28.

Monthly comparison by retail sector and by Member State
The 0.3% decrease in the volume of retail trade in the euro area in July 2017, compared with June 2017, is due to falls of 0.9% for automotive fuel and of 0.5% for “Food, drinks and tobacco”, while non-food products rose by 0.1%. In the EU28, the 0.2% fall in the volume of retail trade is due to decreases of 0.6% for automotive fuel and of 0.2% for “Food, drinks and tobacco”, while non-food products remained stable.

Among Member States for which data are available, the largest decreases in the total retail trade volume were registered in Germany (-1.2%), Croatia (-1.1%), Estonia and Austria (both -1.0%), while the highest increases were observed in Slovenia (+1.4%), Romania and Sweden (both +1.2%).

Annual comparison by retail sector and by Member State
The 2.6% increase in the volume of retail trade in the euro area in July 2017, compared with July 2016, is due to rises of 3.9% for non-food products, of 1.5% for “Food, drinks and tobacco” and of 0.8% for automotive fuel. In the EU28, the 2.7% increase in retail trade volume is due to rises of 4.0% for non-food products, of 1.4% for “Food, drinks and tobacco” and of 1.2% for automotive fuel.

Among Member States for which data are available, the highest increases in the total retail trade volume were registered in Slovenia (+10.0%), Romania (8.8%) and Poland (+7.9%), while a decrease was observed in Belgium (-1.0%).

Geographical information
The euro area (EA19) includes Belgium, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland.

The European Union (EU28) includes Belgium, Bulgaria, the Czech Republic, Denmark, Germany, Estonia, Ireland, Greece, Spain, France, Croatia, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, the Netherlands, Austria, Poland, Portugal, Romania, Slovenia, Slovakia, Finland, Sweden and the United Kingdom.

Methods and definitions
The index of the volume of retail trade measures the evolution of the turnover in retail trade, adjusted for price changes (deflated), i.e. the evolution of the total amount of goods sold, based on data adjusted for calendar and seasonal effects.

Seasonally adjusted euro area and EU series are calculated by aggregating the seasonally adjusted national data. Eurostat carries out the seasonal adjustment of the data for those countries that do not adjust their data for seasonal effects.

Missing observations from Member States for recent months are estimated for the calculation of the euro area and the EU aggregates.

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Compared to July’s rate, which was 1.3%, August’s rate saw an increase of 0.2%.

Inflation in the 19-nation bloc remains well below the European Central Bank’s (ECB) target of close to, but below, 2%.

The rise in the cost of energy by 4%, and the rise of processed food, alcohol and tobacco by 2% were the biggest factors behind inflation. Core inflation remained unaltered at 1.2%.

With the increase in the figures, ECB is considering whether to pull the reigns of the policy after 2-1/2 years of unparalleled stimulus.

Eurostat said that although with rise in the inflation rate, the unemployment rate in the eurozone remained unaltered at 9.1% in July. A thorough analysis showed that some countries performed better than others. The jobless rate in Germany, which is the prime economy in the zone, fell from 3.8% in June to 3.7% in July, while Spain’s jobless rate, the eurozone’s top, remained unchanged at 17.1%. On the contrary, the unemployment rate in France went up from 9.6% to 9.8% and Italy’s rate increased from 11.2% to 11.3%.

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August 18, 2014: According to Eurostat’s flash estimate, Eurozone GDP showed 0.0% growth in the second quarter, down from 0.2% in the first quarter. The figure was even worse than the already downbeat consensus expectation. Year-on-year GDP growth moderated to 0.7% from 0.9% in the first quarter. On a country basis, the biggest countries didn’t perform well. Germany saw a disappointing 0.2 % contraction, undershooting Eurozone growth for the first time since 2009, while France suffered the second consecutive quarter of stagnation. As already reported, Italian GDP shrank by 0.2%, while Spain managed to grow by 0.6%. The Netherlands saw 0.5% growth, though this was merely a bounce back from the very weak first quarter (affected by a drop in natural gas production).

The weak GDP figures are at odds with sentiment indicators, which had been pointing to somewhat stronger 2Q GDP growth. However, one has to take into account a few elements that might have distorted second quarter growth. In a number of countries production has been hurt by two bridge holidays in May. At the same time, there was some pay-back in construction after the mild winter boosted building output in the first quarter.

On the other hand, consumer demand has probably contributed positively to 2Q growth with retail sales growing 0.4% on the quarter, while car sales also expanded. This was confirmed by positive consumption growth figures in both Germany and France. This has likely been compensated by a negative inventory contribution.

Does this mean that growth is bound to accelerate again in the second half of the year? That would have been our expectation if it weren’t for the geopolitical tensions that have injected uncertainty into the outlook. That may likely lead to a further fall in sentiment, hurting the budding domestic recovery. These figures show that the upturn remains too weak to withstand external shocks, meaning that GDP growth will probably remain stuck in stop-and-go mode. It now looks very likely that GDP growth for the whole of 2014 will remain below 1.0%.

The bottom line is that the ECB will have to maintain an extremely accommodative monetary policy, even as the US starts to tighten policy in 2015. The bank will likely be pressured to undertake additional action if some of the downside risks materialise. We believe, however, that decision makers in Frankfurt are likely to continue to highlight the importance of the measures already taken and stand pat for the remainder of the year. Big decisions on more unconventional policy measures will have to await 2015.

Eurozone: Inflation remains too low

Eurozone inflation was confirmed at 0.4% in July, with little to suggest that the ECB’s target will be reached anytime soon. But even then, we don’t believe that deflation fears have increased in Frankfurt.

HICP inflation for July was confirmed at 0.4% year-on-year, while core inflation stabilised at 0.8%. Higher food commodity prices will probably end the negative food inflation in the second half of the year, but energy prices remain at a level consistent with a year-on-year negative contribution to headline inflation. As the economic recovery remains rather fragile, there is little to suggest underlying upward price pressures. Headline inflation is therefore likely to remain below 1% for the remainder of this year. The ECB’s 3Q Survey of Professional Forecasters showed a lowering of expected inflation for 2014 from 0.9% to 0.7% and from 1.3% to 1.2% for 2015.

Even though headline inflation has fallen back to the lowest level in 5 years, the breadth of the deflationary trend has actually narrowed somewhat over the last two months. In July, 28% of goods and services in the consumer basket had a negative inflation, down from 31% in June and 33% in May. Of course, a fall-back into recession could easily reverse this trend again, but for the time being, the ECB is probably not more alarmed about the spectre of deflation than before. That also explains why we believe that the ECB will stand pat until the end of this year, awaiting more data to evaluate the impact of its already announced measures.

Source: ING

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Paris, July 15, 2014: Quick recovery continues to prove elusive for France, the world’s fifth largest economy by nominal GDP, with industrial production taking a plunge in May, accompanied by inflation that hit its lowest point in five years — a surefire recipe for recession — signalling a trend that an independent survey said continued in June.

Data released last week by INSEE, the French National Institute for Statistics and Economic Research, shows that in May 2014, manufacturing output dropped “dramatically” by 2.3 percent, after hitting a flat patch in the preceding month.

Overall industrial production too went south by 1.7 percent, after registering a slender growth of 0.3 percent in April, the INSEE data released on July 10 showed. During the last three months, quarter-on-quarter output weakened by 0.9 percent in the manufacturing sector and the industry as a whole by 1 percent, it added.

INSEE also released data to show that in June 2014, the Consumer Prices Index or CPI remained almost unchanged for the third consecutive month, growing by 0.5 percent in the year to the month under review, down from a growth of 0.7 percent in April and May.

“This decrease in the annual growth rate is partly, for less than 0.1 point, due to a time lag of the price collection that included a higher number of days during the summer sales in June this year than last year,” INSEE said in a statement.

In a further indication of the continuing sluggishness that has had an impact on its payroll numbers, the country’s central bank earlier last week said the French economy crawled ahead by only 0.2 percent between April and June after dragging in the first quarter of the year.

This is in line with an earlier assessment of the Bank of France, which said last month it expects the economy to grow only 0.2 percent in the second quarter over the January-March period.

The assessment was based on its monthly survey report for May that showed its measures of business sentiment in both manufacturing and services sectors declining below their long term averages during the month.

Data released last month by Eurostat, which compiles detailed statistics on the European Union and candidate countries, showed that while industrial production in the four major Euro zone economies slowed in March compared to February, the drag was most marked in France with its factory and mines outputs dipping 0.7 percent.

This was higher than the declines in the other members of the “Big Four” – Germany by 0.2 percent, Spain 0.6 percent and Italy 0.5 percent.

Meanwhile, in a separate development, independent economy tracker Markit said its manufacturing PMI — the gauge for sectoral performance — eased to a six-month low in June, with output levels returning to contraction as new orders witnessed sharp declines.

Alongside, Markit said, employment fell and input cost inflation was the strongest since last December.

“France’s manufacturing sector is back in reverse gear and weakness looks set to persist through the summer,” said Tim Moore, senior economist at Markit.

OUTPUT WORRIES

The weakness in the industrial production of France was visible across the industrial sector, although refining and coke-making led the free-fall with a plunge of 8.4 percent.

In manufacturing, output declined most markedly in electrical, electronic equipment and machine equipment that saw a month-on-month fall of 2.7 percent and, in a less sustained pace, in other manufacturing — a decline of 0.4 percent.

Production of food products and beverages too fell, by 1 percent, as did the manufacture of transport equipment that slid 0.9 percent.

On an annualised basis, manufacturing output fell by 0.7 percent, led once again by manufacturers of coke and refined petroleum products, who saw their output plunging 11.5 percent.

Also declining in the 12-month period were the outputs in the electrical, electronic and machine equipment (down 3.3 percent) and food products and beverages (down 2.3%). The decline was slight in the manufacture of transport equipment – 0.4 percent.

Output increased mildly in other manufacturing, which crawled up 0.5 percent.

INSEE said the changes in the industrial production index in May were potentially exacerbated by “bridging days” – the three public holidays  – Labour Day on May 1, Victory Day on May 8 and Ascension on May 29, all of which fell on a Thursday.  The bridging days are usually considered like normal working days.

INFLATION PAINS           

Meanwhile, as a direct result of limp business activity, there is little pressure on consumer prices, which nosed up fractionally by 0.6 percent in June as compared to a year-ago period.

This fell short of an average rise of 0.8 percent estimated by economists. It was also the lowest level since November 2009 when France emerged from a brief bout of deflation during the height of the global financial crisis.

INSEE also noted that the CPI remained near flat for the third consecutive month, and attributed it to a time lag of the price collection that included a higher number of days during the summer sales in June this year than last year. “This time lag affected particularly the clothing and footwear price collection,” it said.

“Overall, in June 2014, the drop in manufactured product prices has been offset by a seasonal increase in prices of services which occurs usually before the summer holidays. Moreover, prices of food and those of energy declined,” INSEE said in a statement.

The agency also noted that there were large decreases in manufactured goods prices as well as a significant drop in food prices.

Prices of manufactured products fell by 0.4 percent, once again partly linked to a time lag in the price collection calendar.  Similarly, overall food prices decreased in June by 0.2 percent compared to May, and by 1.5 percent compared to a year-ago period.

“The decline in the prices of unprocessed food has continued unabated (down 0.8 percent from May and down10.6 percent from June 2013), mainly due to an abundant supply resulting from favourable weather conditions at the start of this year,” INSEE said.

JUNE OUTPUT

Markit’s June data brought no succour, and in fact pointed to the fastest deterioration in overall manufacturing sector business conditions so far this year. This was highlighted by its final PMI, which fell to 48.2 in the month under review from 49.6 in May.

New business levels decreased for the second month running and, in line with the trend for production, the latest reduction was the steepest so far in 2014, Markit said.

Demand from both domestic and export clients was weaker, and the latest survey signalled a second consecutive monthly fall in new business received from abroad, with the rate of decline the joint-fastest since June 2013.

Lower workloads resulted in further job shedding across the manufacturing sector in June. Staffing levels were cut for the third month running and at the steepest pace since December 2013.

June data also pointed to a rise in average cost burdens for the first time in five months. Moreover, the rate of input price inflation was the fastest since December 2013. Despite higher raw material costs, manufacturers indicated that factory gate charges decreased at a moderate pace during the latest survey period.

“Squeezed operating margins and a return to falling output volumes contributed to the steepest pace of manufacturing job shedding since the end of 2013,” said Markit economist Moore.

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Wiesbaden, June 12: Orders at German factories posted a remarkable recovery in April after taking the sharpest nosedive in a year the month before, official data released here on Thursday said, while an independent survey showed order intakes in May to continue on its northbound arc but at the slowest pace since last October.

In a sprightly beginning to the second quarter, factory orders rose more-than-expected in April to post a 3.1 percent upswing, latest data from the federal statistics agency Destasis showed. German manufacturers had seen orders plummet 2.8 percent in March.

A panel of 34 analysts polled by Bloomberg News had expected German factory orders to rise 1.4 percent in the month under review, and the pace of actual growth seems to confirm the assertion by Destasis last month that “the German economy is gaining momentum”.

“We see fairly balanced, robust growth in Germany at the moment,” Bloomberg quoted Alexander Koch, an economist at Raiffeisen Schweiz in Zurich, as saying. “There is volatility in the monthly data but everything points toward ongoing expansion this year.”

According to Destasis data, the GDP nosed up 0.8 percent upon seasonal adjustments in the first quarter, compared with the October-December period of 2013. “The last time GDP grew more in a quarter-on-quarter comparison was three years ago,” the statistical office said.

The statistics office also said that in a quarter-on-quarter comparison – adjusted for price, seasonal and calendar variations – domestic demand made “positive contributions” to growth in the January-March period.

In a pointer to the overall robustness, household final consumption expenditure increased 0.7 percent in the first quarter this year over the fourth quarter of 2013, while that of the government by 0.4 percent.

Alongside, a survey by independent economy tracker Markit said while factory output was on an upswing in May for the 11th consecutive month, the manufacturing PMI dropped to a seven-month low with both production and new orders rising at weaker rates.

“The latest survey results are a reminder that sustainable strong manufacturing growth cannot be taken for granted and that there may still be some more obstacles on the path to recovery,” said Oliver Kolodseike, economist at Markit and author of the survey report, in a statement.

ORDERS RISE

Meanwhile, the Destasis data showed the recovery in German factory orders in April – notched at a faster than expected pace and beating economists’ prediction – was in part due to a sharp increase in foreign orders, which went by 5.5 percent.

Orders from the euro area advanced 9.9 percent over that of the previous month, while at the same time orders from other countries were up 3.1 percent. Domestic orders had no effect, remaining as it did at the level of the preceding month.

According to the statistical office, “the proportion of major contracts was above average for April”, without which it said the order intake would have increased at a more modest 1.5 percent.

Destasis said orders for consumer goods and capital goods, plus those from overseas, spiked the April numbers. “The order volume in the industry was thus more than the average level of the first quarter (up 1.5 percent)”, it said.

Also, in terms of a three-month comparison, the trend in new orders in January-March this year was slightly more “upward directed” than the October-December 2013 period, it said.

The demand from the domestic market continued to increase in the first quarter, the data office said. In contrast, the orders from abroad in the three-month comparison declined. “Here, the strong monthly fluctuations of large orders played a role,” Destasis said.

New orders for major industrial contracts increased 0.8 percent quarter-on-quarter, it added, and described the trend as “a good start to the second quarter”.

MODEST MAY

Meanwhile, the Markit survey for May said output growth eased sharply during the month though remaining above series average, while order intakes increased at the slowest pace since October last year. Employment growth was sustained, but the rate of job creation was only marginal.

Overall, it said, the May data pointed to the 11th consecutive monthly improvement in manufacturing conditions with the PMI – the gauge for manufacturing activity – dipping to 52.3 from 54.1 in April.

“The latest reading was the weakest since October last year, signalling slower growth in the sector,” Markit said.

The weaker headline PMI reading in May largely reflected slower growth rates of output and new orders. Production growth eased markedly since April to a seven-month low, but was solid overall and remained above the long-run series average.

Meanwhile, the growth rate of new work also fell to the weakest since last October. Markit said some companies talked of new order growth slowing after mild weather had boosted demand at the beginning of the year, while a general positive economic environment was mentioned as a reason for the overall increase in new business.

New export orders also increased at a weaker rate in May, Markit said, adding: “Nevertheless, new export business has now risen for 10 months in succession, the longest continuous spell of growth since mid-2011.”

In line with weaker trends for output and new orders, the rate of job creation was also the slowest in the current six-month period of employment growth, as companies had to reduce workforce in response to slower new business growth.

Backlogs of work fell for the first time in eight months, signalling some spare capacity in Germany’s manufacturing sector. Purchasing activity also rose for the 11th month running during May, but the pace of expansion eased to the slowest since October last year.

The sudden rise in new orders upset suppliers’ delivery times, which deteriorated at the fastest pace since January. According to anecdotal evidence, vendors continued to struggle with larger inflows of new work, resulting in slower delivery times.

“The combination of weaker trends for output and new orders plus falling backlogs of work fed through to the jobs market,” said Markit economist Kolodseike. “Employment growth edged closer to stagnation in May, with some companies shedding staff in response to lower production requirements.”

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26th August 2013

The Eurozone is showing signs of economic recovery with increased manufacturing activity in France and Germany, Eurostat reported on August 14^th that second quarter GDP for the Eurozone expanded by 0.3 percent compared with the first quarter, ending its worst economic phase which lasted six quarters. The Markit Flash Eurozone PMI report for August indicated that the Eurozone Composite PMI jumped to 51.7 from July’s 50.5 for its highest reading in more than two years. But Russia, which is politically aligned to Europe though most of the land area of the country is in Asia, is headed towards recession with its currency plummeting, subpar GDP growth and poor domestic demand. Vedomosti, a Russian business daily reported that the Russian economy contracted at 0.1 percent annually and 0.3 percent in the first and second quarters of 2013. Russia, which will host the 2014 Winter Olympics in Sochi has seen withdrawal of investments by private investors to the extent of $ 50 billion a year and private investment by large and medium sized companies was down 6.3 percent in the first half of 2013 compared with the same period of 2012. PMI Index published by HSBC last week dropped below 50 points, showing signs of a contracting economy.

High Inflation

President Vladimir Putin has been under intense scrutiny and pressure as the public are protesting the lack of willingness of the government to combat corruption and introduce economic reforms. The central bank has not changed the interest rates despite the currency seeing a sharp decline against the Euro and annual inflation in the year has been at 6.5 percent. The central bank has said it can cut the rates once the inflation is within the target corridor of 5-6 percent, it has cited the lack of investment as a major impediment for the lack of growth, capital investment by Russian companies fell by 3.7 percent in June undershooting the forecast of a 0.1 percent rise.

Rouble hits four year low against Euro

The rouble hit a four year low point against the Euro on Thursday amid signs of tapering by U.S. Federal Reserve, the Russian currency fell to 44.33 roubles against the Euro early on Thursday before staging a slight recovery to 44.27 by mid afternoon. The rouble has lost value along with emerging market currencies on the belief that the Federal Reserve would taper its $ 85 billion bond buying programme, a roll back of stimulus would yield higher returns on U.S. bonds and draw in investors who had invested in other countries following the low interest rates in U.S.  Policymakers have given full fledged support to Bernanke’s plan to taper bond buying this year and end it by mid-2014, assuming the positive trend of job growth continues to pick up. The minutes were released on Wednesday.

“Safely” Stagnant

Experts are debating on the fact whether Russia’s economy has slipped into recession or whether it is “safely stagnant”. Although the difference between stagnation and recession is insignificant, it has become a subject of debate as Russia is the world’s sixth largest economy in the world and world’s biggest energy exporter thus becoming a driving force of the global economy. As a countermeasure the Russian Central Bank has been buying millions of dollars daily to prop up the currency and avoid a politically damaging slide. The London based Capital Economics consultancy noted that the rouble has fared better than the currencies of emerging markets in Asia mainly due to the high price on Russia’s oil and natural gas exports. Russia’s Economic Development Minister Alexei Ulyukayev said “There is no recession and there will be no recession. Stagnation is probably a better term. The growth rates are very low; this is an institutional, structural and macroeconomic factor which has to be dealt with for a very long time”. President Vladimir Putin has promised his “factory friendly” policies will create 25m of skilled jobs and revive the economy to a certain extent.  “Weak investment activity and a slow recovery in foreign demand indicate risks of a major economic slowdown, including the medium term” the central bank said in a statement. Economists feel that Russia can stage a recovery in the second quarter backed by domestic demand and creation of new jobs.

WTO Membership could spark revival

Prior to the 2007-08 financial crisis, Russian economy was growing at a rate of 7 percent annually, mainly from its oil and gas exports and providing enough reserves to finance its state expenditure. The country did not concentrate to expand its manufacturing sector and its non-energy sectors such as aerospace domain, industrial gear, pumps and compressors which had huge export potential.  However, the decision to enter WTO could give the country a fresh chance at industrial modernisation for a more diversified economy, Russia became the 156^th member of WTO on August 22^nd 2012, ending 19 years of negotiation. The statistics are however, not in favour of Russia at the moment with its trade shrinking at 0.7 percent in the first half of 2013, exports fell by 3.8 percent and imports increased by 4.4  percent. But experts feel that WTO membership is a “fruit to ripen”, the World Bank estimates that the membership would add an additional 3.3 percent to the nation’s GDP, or about $ 65 billion in the first three years and expected to rise to $ 220 billion within the next decade.

Chris Weafer, a senior partner with MacroAdvisory.com said “The weak global economy is a big part of Russia’s missed targets”. Rating agency Moody’s said Russian companies will not feel the effects of WTO membership until 2016, reaffirming the fact that it will provide a much needed impetus to the neglected sectors in Russia including military.

“The WTO is expected to give much needed synergy to the Russian economy. But synergy does not work in one year. Even a merger of companies starts working in three years. It will take longer for the state to get acquainted with all the rules and legal procedure that WTO provides for Russia” said Vladimir Chikin a partner at Goltsblat to Reuters.

Whether it is the membership of WTO, tapering of stimulus by U.S. Federal reserve or pro active measures by President Putin, it is to be seen if the world’s sixth largest economy will come out of its economic slump and provide an impetus to the recovering global economy.

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