FRANKFURT---German and French retail sales fell sharply in
September, adding to concerns that business activity in the
eurozone's two biggest economies struggled to gain traction at the
end of the third quarter.
Although retail sales don't give the full picture of consumption
because they exclude services, at best the figures point to anemic
economic growth in the eurozone for the third quarter after the
bloc largely stagnated in the spring.
German retail sales in September suffered their biggest monthly
slump since May 2007, falling 3.2% in inflation-adjusted terms,
compared with August, the Federal Statistics Office said
Friday.
That was a significantly bigger drop than the 0.8% decline
economists had forecast in a Wall Street Journal survey. Also,
retail sales growth for August was reduced to 1.5% from a first
estimate of 2.5%. Retail sales are prone to large revisions.
On an annual basis, retail sales were up 2.3%, the statistics
office said. In the first nine months of the year retail sales
increased 1.3% in real terms compared with a year earlier. The
annual figures showed a 4.2% rise in food, beverages and tobacco
sales. Elsewhere, however, sales in textiles, clothing, shoes and
leather goods plunged 7.3%, Destatis said.
"Clothes sales were the key culprit," said Christian Schulz,
senior economist at Berenberg, adding that the weakness "was
probably caused by mild weather in the beginning of autumn, which
discouraged households from splashing out on autumn and winter
collections."
With these figures, the third-quarter average level of retail
sales was down 0.4% versus the previous quarter, said Barclays'
economist Thomas Harjes in a research note. He added that lower
retail figures add "considerable downside risk" to Barclays'
current forecast for 0.3% quarterly German growth in the third and
fourth quarters.
In France, consumer spending fell a sharper-than-expected 0.8%
in September from August, marking a weak end to the third quarter,
French statistics agency Insee said Friday. As in Germany, French
households spent less on clothing and leather goods, which showed
the sharpest drop in spending since May 2012.
Economists polled by The Wall Street Journal had forecast a 0.1%
decline on the month. On the year, consumer spending in September
was up 0.2%.
"Looking forward, we enter (the fourth quarter) without any
momentum; the collapse of petroleum products prices will allow some
purchasing power gains which should help in the coming months, but
the recovery is more likely to materialize next year than this
quarter," said Dominique Barbet, economist at BNP Paribas.
Of the two reports, France's appears to be of greater concern.
The unemployment rate is high and sentiment remains weak amid
concerns over the government's economic policies. In contrast,
German unemployment is near record lows despite a slight dip in
second quarter GDP.
And surveys suggest that consumer sentiment in Germany is set to
improve. The GfK survey released last week showed that German
confidence is expected to rebound in November, indicating that
consumers may have become less concerned about recent global
conflicts.
Berenberg's Mr. Schulz said the fundamental outlook for German
consumption remains strong. Wages rose 3.8% on average in the first
half of the year in annual comparison, while inflation was 0.7% in
October, meaning purchasing power is on the rise.
"As low interest rates create a disincentive to save and job
security is high, consumption growth should remain one of the
pillars for German economic growth in the coming years, he
said.
Ruth Bender in Paris contributed to this article.
Write to Emese Bartha at emese.bartha@wsj.com
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