January’s data show that euro-zone retail sales fell very sharply at the start of this year, despite the strength of online sales. As lockdowns have been extended in many economies and daily virus cases are creeping up, shops may remain closed into Q2, keeping retail sales subdued for a while yet.
Retail’s resilience to restrictions fading
- January’s data show that euro-zone retail sales fell very sharply at the start of this year, despite the strength of online sales. As lockdowns have been extended in many economies and daily virus cases are creeping up, shops may remain closed into Q2, keeping retail sales subdued for a while yet.
- Euro-zone retail sales fell by a whopping 5.9% m/m in January on the back of a drop in non-food product sales, leaving them 6.7% below their pre-pandemic level. (See Chart 1.) The press release was less comprehensive than usual and offered no detail on what led the 12% m/m fall in non-food sales. It noted however that they fell despite online sales rising by 7.1%. January’s plunge was much bigger than the consensus forecast, but expectations were probably revised down after German data were released on Tuesday. Retail sales fell in most euro-zone economies, particularly Austria and Ireland. (See Chart 2.)
- Mobility data show that visits to retail centres remained weak in February. (See Chart 3.) And other types of consumption (including on restaurants and hospitality), which account for a bigger share of household spending, will undoubtedly have remained subdued. Until most economically-damaging restrictions are lifted – which we think will be by the end of Q2 – household spending will remain depressed.
- Other data (also released today) showed that although the number of people out of work in the euro-zone rose by 29,000 in January, the unemployment rate was unchanged at a downwardly-revised 8.1%. (See Chart 4.) Short-time working schemes kept a lid on job losses last year, and governments have extended these in conjunction with lockdown measures. But this won’t prevent job losses altogether, not least because some fixed-term contracts will expire and will not be extended. (See here.) And surveys of firms’ hiring intentions are still consistent with employment falling. We expect the unemployment rate to rise slightly in the coming months, but to remain much lower than many feared a year ago.
Chart 1: Retail Sales by Category (February 2020 = 100)
Chart 2: Retail Sales by Country (% m/m)
Chart 3: EZ Retail Sales & Mobility
Chart 4: Euro-zone Unemployment
Sources: Refinitiv, Google, Capital Economics
Melanie Debono, Europe Economist, firstname.lastname@example.org