Euro-Zone Retail Sales Drop More than Forecast

Euro-Zone February retail sales declined 0.6% m/m and fell 4.0% y/y, after 0.1% m/m and -1.7% y/y in January. Expectations had been for a decline of 0.5% m/m, so data were broadly as expected and the renewed sharp decline backs estimates of another sharp contraction in overall economic activity in Q1 this year. Falling prices are boosting real disposable income, but rising unemployment and the uncertain economic outlook are keeping a lid on consumption trends.

Meanwhile, Euro-Zone February PPI dropped 0.5% m/m and 1.8% y/y, after falling 1.1% m/m and 0.7% y/y in the previous month. The breakdown showed that the sharp decline is only partially due to lower oil prices, which prices excluding energy down 0.4% m/m and 1.0% y/y in February. Previous energy price declines are feeding through the product chain, which together with falling decline is bringing down prices for intermediate goods, which dropped 0.9% m/m and 3.1% y/y.