As Retails Sales Increase, The Economic Outlook Of Eurozone Brightens

The economic outlook of the European Union has brightened with retail sales rising for the fourth consecutive month in January. Official statistics from Eurostat, a European statistics agency, has shown that retail sales rose by 1.1% since December and by 3.7% if compared to January last year. This was the biggest monthly increase since May 2013 and the highest annual increase since August 2005.

Sale of automobiles increased by 3.2% from the month before while non-food sales were up by 1.2%. However, the increase in retail sales is not the same for all the countries belonging to the eurozone. Germany and Portugal had strong increases in their monthly sales which offset the weaker performance of countries like France where retail sales only increased by 0.1%.

The number one element in economic growth is consumer spending. This used to be held back in the eurozone because of the high rates of unemployment and economic uncertainty. There were fears that a negative inflation might occur in the eurozone with prices in January lower by 0.6% than a year earlier. It could impact on consumer spending because people could delay their purchases in expectation of a further lowering in the prices of consumer goods.

Spending on fuel is being seen as the driver in the increase in retail sales. With the decline in the prices of oil, consumers have more money to spend on goods and services. As the benefits from low oil prices continue, it is believed that the eurozone growth will be able to pick up markedly to 1.6% in 2015. According to Howard Archer, the chief European economist at HIS Global Insight, this means a more competitive euro and a substantial ECB stimulus. A separate report suggests that the rate of growth in the eurozone economy in February was the fastest in a seven-month period.

In February, Markit’s eurozone composite purchasing marketing index rose for the third month to 53.3 from January’s 52.6 which boosted new factory orders. Any number that is more than 50 means expansion which means that the index is now at its highest level since July of last year. This news is very encouraging because it shows renewed growth in France, the eurozone’s second largest economy.