Those looking for evidence that Europe is already in recession can find it in this headline: German Retail Sales Decline More Than Forecast

German retail sales declined the most in more than four years in August as concerns about the economic impact of Europe’s sovereign debt crisis sapped consumers’ willingness to spend.

Sales, adjusted for inflation and seasonal swings, slumped 2.9 from July, when they rose 0.3 percent, the Federal Statistics Office in Wiesbaden said today. That’s the biggest drop since May 2007. Economists forecast a 0.5 percent drop, according to the median of 18 estimates in a Bloomberg News survey. Sales rose 2.2 percent in the year.

The debt crisis is threatening to tip Europe back into recession, damping confidence even as falling German unemployment boosts household purchasing power in Europe’s largest economy. While a possible Greek default has clouded the outlook, the Bundesbank still predicts a “robust” third quarter and growth of about 3 percent this year.

The European Commission on Sept. 15 cut its euro-region growth forecasts for the second half and warned the economy, Germany’s biggest export market, may come “close to standstill at year-end.” The International Monetary Fund in Washington on Sept. 20 also lowered its growth projections for the euro region and Germany for this year and next.

Deutsche Lufthansa AG on Sept. 20 lowered its full-year profit forecast and said it would deepen capacity cuts this winter after last month’s results were weaker than expected and forward bookings slumped.

Still, Germany’s jobless rate fell to 6.9 percent this month, the lowest since the country’s reunification two decades ago, as companies stepped up hiring to meet export orders.

I will take the “under” on 3% German GDP in the second half. Moreover, given the slowdown in Europe, the US, Australia, and now China, the ability of the vaunted German export machine to keep humming along is simply not believable.

Retail Sales in the Eurozone Fell Fifth Consecutive Month

Finfacts reports Rate of decline in Eurozone retail sales slows in September

Retail sales in the Eurozone fell for the fifth month in a row in September, according to Markit’s latest PMI (Purchasing Managers’ Index) surveys. That said, the rate of decline slowed to a marginal pace as sales rose in both France and Germany. The survey data again signalled stubbornly high inflationary pressures in the sector, with purchase price inflation at retailers the strongest in over three years.

The Eurozone Retail PMI is a single-figure indicator of changes in the value of sales at retailers. The PMI is adjusted for seasonal factors, and any figure greater than 50.0 signals growth compared with one month earlier. The PMI remained below 50.0 in September, signalling a fifth successive monthly drop in sales revenues. The current sequence of decline is the joint-longest in the past two years. But the index rose during the month, to 49.6 from 48.0, indicating only a marginal decline in sales revenues. The latest PMI figure suggested that the pace of decline in retail sales as measured by the EU’s statistical office Eurostat (on a three-month-on-three-month basis) may ease in the coming months.

Markit says Eurozone retail PMI figures are based on responses from the three largest euro area economies. September figures suggested that Italy remained the weak link, registering a seventh successive monthly drop in retail sales. The rate of contraction was the slowest since March, but still strong overall.

German retail sales continued to rise in September, extending the current sequence of growth to 12 months. This is the longest period of expansion since monthly sales data were first collected in January 2004. The rate of growth slowed to a weak pace, however.

French retail sales rose for the first time since May. The rate of growth was modest, however, and slightly weaker than the average for 2011 so far.

The articles seem at odds with each other since they were both released in the last two days. However, the Bloomberg article was for August, Finfacts was for September.

The important points are the European retail sales PMI is negative and Germany is weakening.

Mike “Mish” Shedlock
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