Italian Retail Sales Fall in December but Beat Forecasts

It was a relatively busy start to the European session. Early in the European session, French nonfarm payrolls fell short of forecasts.

In Q4, nonfarm payrolls remained unchanged versus a forecasted 0.2% increase. Payrolls rose by 0.4% in Q3.

However, investors brushed aside the numbers, with Fed Chair Powell’s overnight speech resonating through the morning session.

Italian retail sales drew more interest following the sharp decline (-2.7%) in euro area retail sales in December. In December, Italian retail sales fell by 0.2% versus a forecasted 0.8% decline. Retail sales rose by 0.8% in November.

According to istat.it,

• In terms of volume, retail sales fell by 0.7% in December.
• The value of retail sales increased by 0.4% in Q4, while the volume of retail sales declined by 1.8%.
• In terms of value, retail sales increased for the twenty-second consecutive month in the year-over-year series.
• Year-over-year, the value of retail sales increased by 3.4%, with the volume of retail sales rising by 4.4%.
• Online sales increased by 0.3% in December compared with December 2021.
• In the calendar year 2022, the value of retail sales increased by 4.6%, while the volume fell by 0.8% compared with 2021.

The latest numbers tracked a regional trend, with the Netherlands (-6.3%) and Germany (-5.3%) seeing marked falls in retail sales. According to the Eurostat retail sales report, only Slovakia (+2.3%), Austria (+1.6%), and Malta (+0.5%) saw increases in retail sales in December.

For Italy, the fall in retail sales by value and volume came despite a pickup in wage growth and steady labor market conditions. However, subsiding recession fears will likely support a pickup in consumption aligned with the ECB’s more optimistic outlook. In Q4, the Italian economy contracted by 0.1%.

EUR/USD Price Action in Response to Italian Retail Sales

Ahead of the retail sales figures, the EUR/USD fell to an early low of $1.07230 before rising to a pre-stat high of $1.07598.

However, in response to the retail sales figures, the EUR/USD rose to a post-stat high of $1.07563 before easing back.

At the time of writing, the EUR was up 0.27% to $1.07559.

Next Up

Beyond the stats, investors do need to consider ECB member speeches. Frank Elderson and Andrea Enria will host an ECB Banking Supervision press conference this morning.

However, it is a quiet day ahead on the US economic calendar. There are no US economic indicators for investors to consider this afternoon. While there are no stats, investors need to monitor FOMC member commentary during the US session.

Following Fed Chair Powell’s market-friendly speech on Tuesday, FOMC members Williams, Waller, and Barr will speak today. Views on inflation, labor market conditions, and monetary policy would draw interest.