Retail sales plunge in the euro zone

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People shop at a local market in Nice, France. Retail sales volume in the 19 countries sharing the euro, already adjusted for inflation, fell 1.2% month on month in June for a decline of 3.7% year on year. PHOTO: REUTERS/FILE

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People shop at a local market in Nice, France. Retail sales volume in the 19 countries sharing the euro, already adjusted for inflation, fell 1.2% month on month in June for a decline of 3.7% year on year. PHOTO: REUTERS/FILE

Eurozone retail sales plunged in June and factory gate prices continued to rise, data showed on Wednesday, adding to fears that the 19-nation single-currency zone is headed for a recession.

The European Union’s statistics office, Eurostat, said the volume of retail sales in the 19 countries sharing the euro, already adjusted for inflation, fell 1.2% month on month in June, for a decline of 3.7% year-on-year.

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Economists polled by Reuters had expected monthly sales unchanged and an annual decline of just 1.7%.

Meanwhile, eurozone business activity, as measured by the Purchasing Managers’ Index (PMI), contracted in July for the first time since the start of last year as consumers restrained their spending in a context of a cost of living crisis.

“The growth momentum in the second half of 2022 appears to be weakening as high and widespread inflation, energy-saving measures and tighter financial conditions increasingly weigh on activity,” he said. said Oxford Economics in a note.

“Respondents see a nearly 60% chance that the euro zone will follow the United States into a technical recession over the next 12 months,” he said, summarizing his latest survey of risk perception among businesses. . A technical recession is often defined as two successive quarters of negative growth.

The drop in retail sales, an indicator of consumer demand, comes as producer prices rose 1.1% month-on-month in June for a 35.8% rise year-on-year, Eurostat said. .

As producer prices are a measure of the prices of goods sold as they leave the producer before taxes, transportation and other costs are added, this rise signals upward pressure on consumer inflation and pressure down on demand.

As the eurozone economy grew more than expected in the second quarter, economists said the expansion could have been a last hurray before a likely recession in the second half.

“The sharp drop in retail sales in the euro zone in June means that sales contracted in the second quarter as a whole,” said Michael Tran, economist at Capital Economics.

“With final PMI surveys indicating that price pressures continue to intensify and demand is weakening, we believe household spending will struggle over the coming months,” he said.

Eurostat data showed energy prices in June nearly doubled from 12 months earlier, but even when excluded producer prices were still 15.6% higher than 12 months earlier. year on year, an increase that is sure to affect consumers’ purchasing power. .

The biggest decline in retail demand is for non-food products, except for car fuel, particularly through mail order and internet orders, where they fell 12.5% ​​year-on-year, Eurostat said.

Germany, Europe’s largest economy, saw the biggest drop in retail sales of 8.8% year-on-year, with third-largest Italy also posting a 2.8% fall in annual terms. The second-largest France still managed a 0.6% year-on-year rise.

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