Euro area retail sales declined 1.6% in December. Sales for the European Union as a whole just about grew with a 0.1% increase. Simon Chinn, Lead Consultant at Conlumino, comments:

“As we expected, retail sales for December were down on last year as the ongoing debt crisis and uncertainties for the year ahead dampened consumer sentiment and spending over the crucial Christmas period.

“Even the Continent’s largest economy could not help bolster the sector. Despite many Germans being in a better position to spend than their southern European counterparts, whose incomes have been hit by various austerity measures implemented to curtail debt problems, the general frugal nature of German consumers resulted in retail sales volumes declining by 0.9% on a year-on-year basis and 1.4% compared to the previous month.

“Unsurprisingly, the biggest declines were witnessed in the austerity-stricken nations in southern Europe. Retail sales growth in Greece, Portugal, Spain and Italy fell into negative territory, and considering the weak comparatives with the year before, when much of the Continent was covered by snow, European retailers would likely have experienced their toughest Christmas for years, with many resorting to deep discounting in both pre- and post-Christmas trading.

“The picture for the year ahead is particularly sombre for these countries in the euro south, with unemployment rates running at historic highs and further government spending cuts on the cards, the prospects for any return to real retail sales growth in the immediate future is highly unlikely.

“Indeed we are already seeing shockwaves of Europe’s retail weakness filter through to some recent company failures. In addition to Schlecker’s bankruptcy, several electrical specialists in Spain including Miró and Urende are having financial difficulties and, following a 3.2% decline in sales for 2011, Fnac unveiled a restructuring plan that will see the loss of over 500 jobs in France and Southern Europe. With no revival to consumer spend expected in 2012, especially while outcome of the eurozone crisis is still so uncertain, we are likely to see further European retailers stumble in the year ahead. Expect more profit warnings, company restructurings and ultimately insolvencies to come.”

Source: Conlumino, February 2012