A bounce back was expected in January retail sales after a sharp decline in December, but the 0.3% month-on-month increase still leaves retail trade volumes well below the November figure.

The weak start in the first quarter makes growth over the quarter a challenge. Retail sales have been on a declining trend since November 2021, but taking the latest data into account, we can see that there has been a more rapid decline since the autumn of last year.

For the consumer, the positive thing is that the inflation peak is behind us, wages are improving, and the economy has not dipped into a material recession, which supports the outlook for employment.

This has helped confidence to improve a little, but with purchasing power still being squeezed, it does not seem like there is a lot of momentum for a quick bounce back in 2023.

Among Member States for which data are available, the highest monthly increases in the total retail trade volume were registered in the Netherlands (+4.9%), Luxembourg (+4.6%) and Slovenia (+4.1%) while the largest decreases were observed in Austria (-9.8%), Slovakia (-1.4%) and Hungary (-0.6%).

Overall, surveys are suggesting somewhat better economic activity in the first quarter, but given fourth-quarter weakness and surveys missing the mark recently, performance at the start of the year is clouded in uncertainty.

This makes it hard to get a strong view of where the economy is headed in the short term, but if today’s release on retail sales is anything to go by, it doesn’t look like the economy has started a rebound just yet.

Article based on a story from ING bank as copyright owner