Euro area retail sales fall short of forecasts in July

Retail sales in the single currency bloc unexpectedly fell during the month of July.

According to Eurostat, retail sales volumes dropped at a month-on-month pace of 1.3%, with non-food sales shrinking by 2.9% and food sales flat.

The drop in the headline rate was far less than the 1.2% rise that economists had penciled-in and followed a 5.3% increase in June.

In turn, June's increase was initially reported at 5.7%.

The largest monthly declines in sales were recorded in textiles and clothing (-8.7%), Mail orders and internet (-6.7%) and in those of computer equipment (-5.8%).

From among the single currency bloc's main economies, retail sales in Germany dropped by 0.9% and those in the Netherlands by 0.1%, while in Spain they rose 1.2% and in France by 1.5%.

Data for Italy are confidential.

Versus a year ago, euro area retail sales were 0.4% higher, which was far less than the consensus forecast for growth of 3.7%.

Commenting on the retail sales figures and the outlook, Claus Vistesen at Pantheon Macroeconomics said that there appeared to be a mean reversion going on following the binge in sales during lockdown.

He also called attention to the slowdown in online sales as economies reopened.

"Looking ahead, we think a trend in year-over-year growth of zero-to-0.5% is a decent baseline, which would leave the headline retail sales index more-or-less flat between now and the end of the year. Risks are tilted to the downside, however, based on the fact that sentiment is stalling."