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EMU’s domestic demand seems to gather pace – Danske Bank

FXStreet (Edinburgh) - Pernille Nielsen, Senior Analyst at Danske Bank, reviewed the recent retail sales results in the euro bloc.

Key Quotes

“Euro area retail sales surprised on the upside in August as they increased 1.2% m/m and 1.9% y/y. Excluding June, the yearly change was the highest since April 2007”.

“The increase in retail sales in August followed a decline of 0.4% m/m in June, but the preliminary average for Q3 is much higher than in Q2 and, so far, it seems that private consumption will continue to strengthen in Q3. In Q2, private consumption increased 0.3% q/q, but GDP stagnated partly due to a negative impact from changes in inventories”.

“For the manufacturing sector, we expect stabilisation before a gradual recovery sets in at the end of the year. This should follow as the weakening of the euro should gradually feed through to exports while private consumption continues to be supportive”.

“The increase in retail sales shows that consumers do not postpone consumption although inflation is very low. During the first part of H1 the ECB argued that low inflation was not seen in consumer behaviour and it still seems to be the case”.

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