Euro area retail sales increased 0.4% m/m in October after declining 1.2% m/m in September. In yearly terms they were up 1.4% in October and have increased at around that level since April.
There was an increase in sales of both non food products and automotive fuel of 0.7% m/m in October, while sales of food, drink and tobacco were unchanged. There are no details for clothing and footwear sales yet, but in September they declined 8.7% m/m and based on the German figure they should have rebounded somewhat in October. Sales of clothing and footwear could increase further going forward.
Although retail sales did not fully rebound after the drop in September, private consumption continues to look more resilient than the manufacturing sector and we believe the subdued GDP growth in Q3 was driven by weak investments, while private consumption continued to grow modestly.
Looking ahead we expect private consumption to continue to increase, as real wage growth is increasing and as the decline in the unemployment rate during 2014 has supported an increase in consumer confidence.
The latest decline in the oil price will also be very supportive for private consumption going forward.
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