SUMMARY
- The ECB Leaves its key policy rate at 0.15 percent.
- The Eurozone retail sales fall flat as fuel and food sales fall.
- The ECB will move to a 6 week policy meeting schedule beginning January 2015.
The European Central Bank (ECB), headed by Mario Draghi, kept its key monetary policy steady as expected. This follows last month’s key and unprecedented stimulus measures.
Without a doubt, the region’s economy needs help as both the Purchasing Manager’s Index (PMI) and the European Commission’s Economic Sentiment Indicator weakened for last month. Retail sales, across the EU also disappointed as they came in flat. This is just another in a string of weak economic data coming out of the EU since the beginning of the year. In the first quarter the Eurozone’s gross domestic product (GDP) grew at a mere 0.2 percent on a quarterly basis and the unemployment rate is remaining sticky at 11.6 percent.
Today’s retail sales out of the 18 country currency bloc were flat. Sales missed expectations as consumers continue not to spend thanks to the persistently high unemployment rate. According to Eurostat sales volume month to month, was flat in May compared to April’s marginal increase of 0.2 percent. The Eurozone saw a rise in the non-food sector of 0.3 percent but fuel was unchanged. Food, beverages and tobacco fell 0.3 percent in the month of May.
Annual retail sales were up 0.7 percent on a yearly basis. This was driven by a one percent increase in non-food items and a 0.8 percent increase in fuel. It looks like the EU is only going to squeeze out a marginal, weak, sales growth for the second quarter. This is adding fuel to the fire that the ECB is finding it difficult to build any momentum in growth. We saw flat retail sales in May along with a dip in the EU consumer confidence level from June’s 6 year high which leads us to suspect consumer spending will be very gradual and not as robust as we, or the ECB, would like.
On another note, the high European unemployment rate remains at 11.6 percent which is slightly below the 12 percent we saw a year ago. As Mario Draghi is speaking we have noted that the policy meetings for the ECB will now change to a six week cycle beginning January 2015.