Eurozone Retail Sales Drop For First Time In 5 Months; Services Output Fall

(RTTNews) - Euro area retail sales decreased for the first time in five months and services production declined in May, suggesting a slowdown in the second quarter.

Retail sales logged a monthly fall of 0.7 percent in May, reversing April's 0.3 percent increase, Eurostat reported Monday. Sales were expected to drop 0.8 percent.

Another data from Eurostat showed that services production decreased 0.3 percent from April, when output was up 0.8 percent.

Retail sales of food, drinks and tobacco declined 0.7 percent and that of non-food products slid 0.6 percent. At the same time, automotive fuel in specialized stores fell 1.3 percent.

Year-on-year, retail sales growth eased to 1.8 percent in May from 2.7 percent in the prior month.

Retail sales in the EU27 fell 0.8 percent in May from the previous month but increased 1.9 percent from the last year.

Among member states, the largest monthly decreases in the total retail trade volume were recorded in Sweden, Belgium and Estonia. Meanwhile, the highest increases were observed in Portugal, Bulgaria and Cyprus.

Recent surveys had previously indicated potential weakness in euro area services for the second quarter and today's data confirmed expectations that GDP growth between April and June may have been negative, ING economist Bert Colijn said. The economist said the decline may be partly due to the timing of holidays but it clearly lowers the overall trend.

Colijn observed that the potential for a retail sales rebound remains significant though as purchasing power continues to recover in the currency bloc.

The current problem is that savings rates continued to rise due to high uncertainty. The low level of consumer confidence can have a lasting impact on sales in European retail districts, the economist noted.

Second quarter GDP will likely be a reality check for economic activity and the overall trend continues to be sluggish, he added.