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Fall In Eurozone Retail Sales

James Boston
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Fall In Eurozone Retail Sales

The Governing Council of the European Central Bank (ECB) is currently meeting in Frankfurt to discuss it’s next steps to boost the underperforming Eurozone economy. It likely that they are privy to the disappointing Retail Sales figures that have just been released into the market. At 0.7% year on year the headline Retail Sales growth number for May has come in at less than half that of the previous month, the April reading was 1.8% and the market had been anticipating a reading of at least 1.2% expansion. The month on month number did however come in flat at 0.0%, this is a slight improvement on last month’s -0.2% contraction but it did disappoint observers that were expecting more positive growth of 0.2%.

The last two weeks have been very poor in terms of Eurozone data releases, mixed services and manufacturing numbers have not inspired and the lack of progress in either unemployment or inflation are obvious causes for concern. The policy action announced this time last month by the ECB will not have had sufficient time to make an impact, there are of course question marks around whether it was sufficient to make an impact in any time frame. This should not prevent the Bank from taking further action at today’s meeting.

Surprisingly, there is little market expectation for any further ECB action this month. Mario Draghi and his team would be very conscious that, following last month’s statements, any follow up action this month could give the illusion of panic by the monetary authorities. Despite the urgent need for stimulus it is much more likely that this month’s meeting will be used to pave the way for quantitative easing in the near future. The scale and effect of a quantitative easing program means that the timing of such action is vital, the ECB made it clear that it is not going to rush into this but based on current data it’s options are dwindling.

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