Need To Know News

German retail sales have generally been in decline in recent months, but the trend may stabilize in the run-up to the Christmas holidays. 

October retail sales in Europe’s largest economy are forecast to rise an average of 0.5% versus a fall of 2.3% in September. 

Measured at an annual rate, retail sales are estimated to have fallen 0.4% from up 1.2% in September and against August’s shocking 3.3% decline.

The October data is scheduled for release at 0700 GMT on Monday, and Need to Know News’ (NTKN) Scream Audio will report the data live.

The Euro-zone inflation rate fell to 2.1% in November year-on-year, increasing hopes for a bold rate cut by the European Central Bank (ECB) next week.

The flash estimate, published by EU statistics agency Eurostat, was lower than expected. A poll of economists had forecast a year-on-year drop to only 2.4%, compared to 3.2% in October.

“This is excellent news. Inflation is coming down sharply, proving once again that the only problem with inflationary pressures had been to do with oil and food prices,” said Holger Schmieding, chief European economist at Bank of America.

“This means the ECB has every possible argument next week to go for a 75-basis-point cut. It may seem to be reluctant but the case is stronger for the inflationary hawks at the ECB,” he added.

Schmieding said he expected markets to price in a slightly better chance for a “bold” rate cut.

The ECB has however given strong signals it would take things slowly, prompting other economists to stick with forecasts for a 50 basis points. 

“The ECB is still quite cautious and not willing to do what the Bank of England did,” said Peter Vanden Houte, chief economist at ING Financial Markets.

He said he expected markets to remain “subdued” as a 50-basis-point cut has already been priced in after plunging euro zone economic sentiment indicators and a drop in the German inflation rate.

Eurostat also published unemployment figures for October, showing an increase in the rate to 7.7% compared to 7.6% in September. Economists had expected it to remain at the same level.

This, together with easing inflationary pressures and weak economic sentiment, spells a drop in fourth-quarter GDP growth, according to Vanden Houte. “I can imagine fourth quarter GDP growth will come out at 0.5% to 0.6%, which would be weaker than expected,” he said.