Eurozone's economy enters stagnation – ABN AMRO

Aline Schuiling, the senior economist at ABN AMRO, notes that the volume of retail sales in the eurozone increased by 0.3% mom in August, following a 0.5% drop the month before.

• “The 3m-o-3m growth rate increased from 0.2% to 0.5%, which suggests that sales will have expanded during the third quarter as a whole. Meanwhile, new car registrations probably also increased during Q3, with the 3m-o-3m change up from 2.1% in July to 5.7% in August.
• The combination of changes in retail sales and car registrations tends to track changes in total private consumption growth relatively well. The data for July and August indicates that private consumption grew at a modest rate of around 0.2-0.3% qoq in Q3, following 0.2% qoq in Q2.
• The modest expansion in private consumption growth is part of a broader trend of the weakness in exports and industry that started more than one-and-a-half years ago, spreading to domestic demand and services. Indeed, the services sector PMI for September was revised lower to 51.6, from a preliminary estimate of 52.0, while the forward-looking new business component of the survey was revised downwards as well.
• Due to the revision in the services sector PMI, the composite PMI declined to 50.1 in September (preliminary estimate 50.4), a level that is consistent with stagnating GDP.”