Consumers came out forcefully when governments eased restrictions in the spring, but that effect ended sooner than most would like to see. After solid readings through June, July and August are now showing sales levels in line with the pre-crisis trend. August saw an increase of 0.3%, which was lower than expected, after the sharp drop of -2.6% in July.
This means that the rebound in consumption eased rapidly over the summer months, which does not bode well for household consumption expectations in the third quarter. Without growth in September, retail sales will only have increased by 0.2% in 3Q after jumping 3.9% in 2Q thanks to reopenings.
The outlook for consumption from now on becomes a little more confused. With soaring energy prices, the end of holiday plans and the rebound effects weakening, we expect consumption growth to fade in the fourth quarter. We’re not expecting anything drastic as there are still a number of factors suggesting that above-trend retail sales growth is possible. Think of the high savings still accumulated by Europeans, low unemployment and historically high consumer confidence. Nonetheless, it looks like retail sales peaked in the second quarter and consumption is set for moderation from here.