Thursday, August 4, 2011

Euro Area Retail Trade Stats

The core concern about Italy and Spain is that they won't be able to grow while in a monetary union with stronger economies (especially Germany); in particular while facing tight monetary policy designed to prevent inflation in those economies.  If they can't grow, they are going to have trouble servicing their debts.  To assess this, it's helpful to look at other series, besides GDP, that are more timely.  One is retail trade, for which I found some data at Eurostat.  The series for the entire EU and the Eurozone are above.  That graph pretty clearly says "double-dip" - that a second recession has already begun, particularly in the Eurozone.

Looking at the five largest European economies over the last 12 months we get this:

Clearly Spain is going down the tubes at a fairly rapid clip following the collapse of its housing bubble.  This is presumably why government bond prices are now similar to Italy despite the latter's much larger debt.  Italy's retail trade is also shrinking but much more slowly.  Even Germany only just returned to the level of 2005 in June.  France and the UK look better (to the extent that shopping more is a good thing, anyway).  However, both are basically flat over the last 12 months.

It seems worth keeping an eye on these series in coming months.


RobM said...

I was under the impression that you understood growth was over due to peak debt and declining net energy. This post suggest otherwise. Did I misunderstand your position?

Gerald said...

I suspect we have stumbled into a steady-state economy. It is not that nothing changes but the aggregate level of economic activity is roughly constant. We're still using more or less the same resources so the longer term outlook is not particularly changed.