Eurozone economy set for continued strength supported by strong retail sales and PMI numbers - ING

Bert Colijn, Senior Economist at ING, notes that the Eurozone retail sales grew by 2.3% YoY in March and the composite PMI increased more than expected to 56.8 in April as upside surprises continue to be the norm for Eurozone figures at the moment.

Key Quotes

“Retail sales increased by 0.3% in March, which was the third increase in a row and stronger than analysts had expected. Still, growth for the quarter came in at just 0.3% QoQ, after 0.8% QoQ in 4Q16, due to a strong jump in October. The somewhat weaker sales last quarter seems to relate to the temporary surge in inflation. This has caused real wage growth to take a hit. While GDP growth was strong in 1Q, consumption growth may have slowed somewhat. These retail sales figures confirm that.”

“The outlook for growth remains strong though. The second release of the April Eurozone composite PMI confirms that as the figure was revised upward from 56.7 to 56.8. The survey indicates that output growth accelerated for both businesses and services. Employment growth slowed slightly, but is still near a decade high. This bodes well for the consumption outlook. Unemployment has continued to come down significantly over recent months and with job growth expected to accelerate, the outlook for consumption remains positive for the months ahead. So while 1Q may not have been spectacular in terms of sales, there are plenty of signs pointing to a pickup of consumption in the months ahead.”