Europe goes shopping as prices keep dropping, but confidence may be short-lived

 
Jake Cordell
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Europeans bought 2.4 per cent more retail goods in February 2016 compared to last year
Europeans bought 2.4 per cent more retail goods in February 2016 compared to last year (Source: Getty)

The Eurozone was treated to a rare piece of good economic news this morning, as official figures showed households are buying 2.4 per cent more retail products than this time last year, though economists were pessimistic about how the long the feel-good factor would stick around.

According to Eurostat, the EU’s official number crunchers, bumper spending on food, drink and tobacco helped push total sales volumes across the 19 Eurozone countries up from the annual increase of two per cent registered in January. The figure was ahead of forecast expectations of around 1.9 per cent.

Cheaper goods, rather than bumper spending, explained the rise: as the total amount of money spent in shops actually fell 0.2 per cent over the last year, showing consumers are cashing in on low inflation, and getting more bang for their buck on household essentials.

There was no time to policymakers to help push sales of champagne any higher, however, as retail volumes in Germany, the Eurozone’s largest economy actually slipped for the second consecutive month, falling 0.4 per cent in February.

Purchasing managers’ index (PMI) data out this morning also hinted the consumer recovery will be fleeting. The Markit PMI came in at 53.1 in March, indicating an expansion, but at a slower rate than previous estimates of 53.7 suggested.

The picture was markedly different across the Eurozone. Ireland’s PMI checked in at an impressive 60.7, while Spain registered 55.1. Powerhouses Germany and France, however, disappointed. The former scored 54.0 - an eight-month low while France’s score of 50.0 indicated neither expansion nor contraction during the month.

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