German retail sales data for March were released today indicating a second consecutive decline, surprising even the most pessimistic forecast.
The Federal Statistical Office data showed a decline by 2.1 percent on a month-over-month basis and by 3.5 percent year-on-year.
German consumers bought fewer groceries and textiles in March as inflation shot past the 2 percent threshold. The breakdown shows that sales for food, drink and tobacco were 4.8 percent lower than a year ago in March 2010. Over the same period, non-food turnover dropped by 2.4 percent.
However, despite the latest data, previous reports have shown optimism in the Eurozone economy overall. For example, Markit Economics release of PMI for retail purchasing managers indicated a growth to 54.6 which was above average.
Senior Markit economist , Tim Moore commented that “Retailers also showed signs of improved confidence about the underlying outlook for sales, as the value of goods ordered for resale rose at a survey-record pace and staff recruitment was the strongest since September 2007.”
The recent Gfk Group Consumer climate index for the Eurozone showed household’s propensity to buy is still strong despite rising inflation. However, consumer consumptions may be dampened if inflation is not kept in check and prices continue to rise at a fast pace.
The European Central Bank has recently raised the benchmark interest rate by 25 basis points last month in order to keep inflation in check.
The Euro has been steadily rising since last month’s rate hike and reached a 16-month high of 1.4880 against the greenback on Thursday. EURUSD opened the European trading session at 1.4841 this morning. Upon release of the news, EURUSD spiked own by 10 pips and rallied for a few minutes but soon rose to a high of 1.4850.