Decline in German Retail Sales in November Indicates Recession Warning

German retail sales numbers in line with projections of a eurozone economic downturn. The upcoming data to watch is the inflation figures for December in the Eurozone.

Highlights

• German retail sales fell by 2.5% in November.
• The significant drop in consumer expenditure matched predictions of a eurozone economic decline.
• The Eurozone inflation data, the US Jobs Report, and the ISM Services PMI are the next anticipated releases.  

Retail sales in Germany experienced a decline in November.

Amid concerns about a potential recession in the euro area, German retail sales attracted attention from investors on Friday. A greater-than-expected decrease in consumer expenditure could alleviate demand-driven inflationary pressures. This could lead to a less aggressive approach to interest rate adjustments by the ECB. However, a significant drop in consumer spending could also reinforce expectations of a recession in the euro area.

In November, German retail sales declined by 2.5%, reversing the 1.1% growth seen in October. Economists had anticipated a 0.1% decrease in retail sales. Year-over-year, retail sales were down by 2.4%. In comparison, in October, retail sales had declined by 0.1% year-over-year.  

The response of EUR/USD to the German retail sales data

Prior to the retail sales data release, the EUR/USD reached a peak of $1.09559 and then dropped to a low of $1.09280.

Following the retail sales announcement, the EUR/USD declined to $1.09251 and subsequently climbed to a high of $1.09293.

By the end of Friday, the EUR/USD had decreased by 0.14% to $1.09293. 

050124 EURUSDの3分足チャート 

Upcoming: Eurozone Inflation

Eurozone inflation data for December is anticipated to have a significant impact on ECB policy objectives. Analysts predict that the annual inflation rate will rise from 2.4% to 3.0%. Nonetheless, core inflation is expected to moderate from 3.6% to 3.5%. Should inflation figures exceed expectations, it would be consistent with recent ECB indications of an extended period of elevated interest rates.

Following the Eurozone inflation data, attention will shift to the US economic calendar.  

Attention on US Employment Data

Investor attention will be on the US Jobs Report, with expectations of wage growth and unemployment rate stability potentially influencing predictions about a Q1 Fed rate adjustment. Forecasts indicate a slight decrease in average hourly earnings year-over-year from 4.0% in November to 3.9% in December, alongside an anticipated rise in the US unemployment rate from 3.8% to 3.9%.

While the Jobs Report remains the focal point, the US Services PMI should also be considered. An increase in service sector activity could allay concerns about a severe economic downturn. However, it's important for investors to delve into the finer details, including the price, employment, and new order sub-components.

Economists predict a drop in the ISM Services PMI from 52.7 to 52.6 in December.