Euro-Zone Retail Sales Reflect Softness

Retail sales in the twelve Euro-Zone countries softened in September.  While sales were up just under 1 percent over the same month a year ago, they were down from the prior month on a seasonally adjusted basis.  These weak retail sales trends do not bode well, especially for jewelers, during the upcoming holiday selling season. 

The graph below summarizes monthly retail sales trends in the 12 Euro-Zone countries of Germany, France, Italy, Spain, the Netherlands, Belgium, Greece, Portugal, Austria, Finland, Ireland, and Luxembourg.  The aggregate population of the Euro-Zone and European Union (25 countries) make it the third most populous region of the world, after China and India; however, only about 12 percent of all diamond jewelry is sold in Europe.  Thus, this geopolitical region is very important for the jewelry and diamond industry, and it appears to hold much market potential for increased sales. 

Retail sales in the 25 European Union countries rose by 1.4 percent, year-over-year, during September, but these statistics were skewed by dramatically stronger performance in developing countries such as Latvia, Lithuania, and Slovakia.  The United Kingdom, a European Union but not a Euro-Zone country, posted a very modest retail sales gain of 0.8 percent (September 2005 vs September 2004).  The UK, if it were included in the Euro-Zone, would be the second largest country with 25.6 million households. 

By category in Euro-Zone countries, consumables such as food, drinks, tobacco, newspapers, and books showed the weakest gains while textiles, footwear, and household goods showed solid gains. 

Consumer demand remains the weakest link in the Euro-Zone recovery.  Consumer sentiment is fragile, unemployment remains very high, and real wage growth lags.  Thus, consumers are loath to part with their hard-earned cash. 

The monthly retail sales figures are volatile and difficult to interpret.  However, overall they are very weak:  year-to-date Euro-Zone sales are up just over 1 percent versus U.S. retail sales which are up nearly 8 percent year-to-date. 

On a country-by-country basis, the following graph illustrates retail sales gains for the month of September.  The countries are ranked largest to smallest (left-to-right) by number of households.  It is notable that the largest Euro-Zone countries are posting some of the weakest sales gains.