What’s going on here?
Data out on Tuesday spells trouble for the eurozone, and the region’s regular savior isn’t coming to the rescue this time.
What does this mean?
Sturdy consumer spending is the backbone of most advanced economies, which is why economists use retail sales to gauge how countries are holding up. But the latest eurozone checkup was far from reassuring: Europeans are paying their bills, buying their increasingly pricey essentials, and saving the rest away for a recessionary day to make the most of higher interest rates. So despite expectations of a slight improvement, retail sales didn’t grow at all from March to April, with every category dropping from the same time last year.
Why should I care?
Zooming in: The golden child’s rebelling.
Tuesday’s data reinforces the idea that Europe’s stuck in a slump at the moment, after narrowly skimming past a recession in the first quarter of the year. And Germany – usually the powerhouse of the region – isn’t swooping in to help. The country’s in the midst of a recession, and data shows that its all-important manufacturing industry is stuck in the mud: factory orders fell unexpectedly in April and demand ate away at exports in May. So unless the problem child becomes the golden one, the eurozone will struggle to pull itself up anytime soon.
The bigger picture: Mob mentality.
There might be some light at the end of the tunnel though: the European Central Bank (ECB) released data showing that consumers’ expectations for inflation dipped “significantly” last month. That matters, since predictions shape behavior: you’re more likely to splurge on your wishlist if you think prices are about to swell big time, and when a bunch of shoppers all act the same way, you get a self-fulfilling prophecy of demand-fueled, pushed-up prices. So this news that folks are now expecting tamer increases may mean the ECB’s inflation-fighting efforts are bearing fruit.
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