Eurozone Christmas sales unlikely to prevent spending contraction

We think the outlook for traditional winter sales in the eurozone is subdued this year and any boost won’t be enough to prevent consumer spending from contracting in Q4. Indeed, having already fallen in the past three quarters, we expect retail sales to contract over the next six months.

What you will learn:

• High prices in most traditional goods segments, five successive quarters of real income declines, and rock-bottom consumer confidence all suggest Christmas sales will underwhelm.
• High inflation is the main culprit. Retail sales of non-food goods have broadly stagnated in volume terms over the past few months – a surprisingly resilient performance given households have to pay over 10% more for them.
• Given the downbeat sentiment and the cost-of-living crisis, we doubt consumers will spend much of their remaining excess savings on discretionary items such as Christmas sales. A substantial portion of excess savings are still held in a liquid form despite high inflation and could be readily deployed.