The final quarter of 2024 brought little relief for retailers in the eurozone, as new data from Eurostat highlights a sluggish recovery in retail trade. Despite a slight uptick of 0.1% in seasonally adjusted retail trade volume in November 2024, following a -0.3% decline in October and a 0.5% increase in September, the overall trend remains disappointing.
In the European Union as a whole, retail trade volumes showed a slightly better performance, increasing by 0.2% in November. However, these numbers still fail to approach pre-pandemic levels or the November 2021 peak.
Andrew Kenningham, Chief Europe Economist at Capital Economics, commented on the data, noting that “total sales remain well below their pre-pandemic trend,” which signals a continued struggle for the retail sector to regain momentum.
Factors Contributing to Weak Retail Performance
Several macroeconomic factors have contributed to the underwhelming performance of retail trade in the eurozone. The aftershocks of the COVID-19 pandemic, coupled with disruptions caused by the war in Ukraine, led to a peak in inflation during 2022. While inflationary pressures are now easing and the European Central Bank (ECB) has begun a rate-cutting cycle, tighter fiscal conditions continue to weigh heavily on consumer spending.
Although November 2024 saw some areas of growth, such as a 0.8% rise in automotive fuel trade and a marginal 0.1% increase in food, drink, and tobacco sales, the trade of non-food products (excluding automotive fuel) declined by 0.6%. This uneven performance reflects the ongoing challenges faced by the retail sector.
Regional Performance Highlights
Retail trade volumes in November 2024 varied significantly across the EU’s member states:
Top Performers: Cyprus (+2.3%), Bulgaria (+1.3%), Denmark, and Latvia (both +1.1%).
Underperformers: Belgium (-2.4%), Germany and Spain (both -0.6%), Poland and Finland (both -0.2%).
France showed modest growth with a 0.3% monthly increase.
Forecasts for 2025: A Cautious Optimism
Looking ahead, analysts predict that the eurozone retail sector may see modest improvements in 2025. Andrew Kenningham noted that “rising real incomes, modest employment growth, and falling interest rates should support consumption.” However, he cautioned that a strong rebound is unlikely, as real income growth is expected to slow in the coming year.
Peter Vanden Houte, Chief Economist at ING Belgium, pointed out that November’s weaker retail sales were not primarily due to insufficient purchasing power but rather a reduced willingness to spend. “One of the drivers of weaker consumer confidence is the expectation of higher unemployment,” he explained, adding that this has led to increased precautionary savings.
Vanden Houte further noted that political uncertainty in major economies like France and Germany, as well as structural changes in the labor market, could hinder a significant recovery before the latter half of 2025.
Source: Euronews
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