European consumers reluctant to splash cash despite slowing inflation

Despite the decelerating inflation in Europe, recent data on retail sales suggests that consumers in the region are reluctant to boost their spending. According to the latest seasonally adjusted figures from Eurostat, retail sales volume in the eurozone and the EU declined more than anticipated in February, dropping by 0.5% and 0.4% respectively compared to the previous month. Year-over-year comparisons also reveal decreases of 0.2% in the EU and 0.7% in the eurozone, marking the continuation of a downward trend in the latter for 17 consecutive months.

All sectors of retail experienced declines in February. Monthly comparisons indicate reductions of 0.4% for food, drinks, and tobacco, 0.2% for non-food items, and 1.4% for automotive fuel in the eurozone. Similarly, in the EU, sales in these categories decreased by 0.5%, 0.1%, and 0.9% respectively.

Across member states, Germany and Belgium saw the largest monthly decreases, while Poland and Croatia registered the highest increases. Belgium experienced the most significant year-over-year decline at -6.8%, whereas Croatia exhibited the most substantial increase at 9.2%.

Despite hopes that the slowdown in European inflation would stimulate spending, the data thus far does not support this expectation.