The latest figures make for concerning reading suggesting that consumers in Germany may not continue to drive the economy in the light of the poor recent performance of manufacturing.
The most striking figure is a dramatic collapse in German retail clothing sales of 8.3% in July but the consultancy urges investors to also note what it calls an equally incredible rise of 13.6% in June.
Data published this week showed broad Eurozone consumers’ spending off to a bad start in the third quarter. Retail sales fell by 0.6% month-to-month in July, driving the year-over-year rate down by 0.6 percentage points to 2.2%.
Pantheon economics chief eurozone economist Claus Vistesen said: “This is not the headline we were hoping for, given still-weak manufacturing and evidence that construction is now rolling over too, though it would be far too alarmist to draw any substantive conclusions based on the July data.”
Meanwhile the picture for manufacturing remains grim. Factory orders in Germany slid by 2.7% month-to-month in July, well below the consensus for a 1.4% decline. The year-over-year rate plunged to -5.6% from a revised -3.5% in June, also below the consensus, -4.2%. Net revisions to the month-to-month data were +0.2 percentage points.
In terms of the retail numbers, the main hit to EZ headline sales came from a 2.2% month-to-month plunge in Germany, overshadowing much less bad data elsewhere. For example, sales were flat on the month in France and Spain.
Discussing the German retail data, the consultancy says the retail data is supposed to be both seasonally and working-day adjusted, though they mostly behave like noise, to the detriment of the aggregate euro area data.
“In constant prices, the trend in retail sales of clothing appears more or less flat, but the monthly variations are huge.”
It says there are reasons to be worried, but it needs more data to be sure.
“Retail sales data in Germany are wild, and heavily revised, so when they’re the main swing factor for the EZ headline, we’re always sceptical,” says Vistesen.
The composite PMI in the Eurozone increased to 51.9 in August, from 51.5 in July, trivially above the consensus and first estimate, 51.8.
That is better than initially estimated services PMIs in France and Germany, at 53.4 and 54.8 respectively, which were the main drivers of the marginal upside surprise.
The composite PMI in Spain edged higher to 52.6, from 51.7 in July, boosted by a rebound in the services index, while the Italy slipped to 50.3 from 51.0.
Vistesen adds: “Overall, these data continue to signal relative resilience in the domestic and non-tradable economy amid the increasingly worrying collapse in manufacturing and goods exports.
“Output and new business growth in services appears to have picked up a bit in the third quarter, while the slowdown in manufacturing has intensified. Markets tend not to focus on the hard services data, mainly because they’re released with a significant lag, or in the case of the monthly services output index, they are still in a trial phase.”