German Retail Sales Tumbled 2.5% in November Sending Recession Signals

Highlights

German retail sales tumble by 2.5% in November.
The marked decline in consumer spending aligned with expectations of a euro area recession.
Eurozone inflation, the US Jobs Report, and the ISM Services PMI are up next.

German Retail Sales Tumble in November

Amidst fears of a euro area recession, German retail sales drew investor interest on Friday. A larger-than-expected fall in consumer spending could ease demand-driven inflationary pressures. The net effect could be a less hawkish ECB rate path. However, a marked decline in consumer spending could also support expectations of a euro area recession.

In November, German retail sales tumbled by 2.5%, reversing a 1.1% increase in October. Economists forecast retail sales to fall by 0.1%. Retail sales were down 2.4% year-over-year. In October, retail sales were down 0.1% year-over-year.

EUR/USD Reaction to German Retail Sales

Before the retail sales figures, the EUR/USD rose to a high of $1.09559 before falling to a low of $1.09280.

However, in response to the retail sales report, the EUR/USD fell to $1.09251 before rising to a high of $1.09293.

On Friday, the EUR/USD was down 0.14% to $1.09293.

050124 EURUSD 3 Minute Chart

Next Up: Eurozone Inflation

Eurozone inflation figures for December will likely have more influence on ECB policy goals. Economists forecast the annual inflation rate to accelerate from 2.4% to 3.0%. However, economists expect core inflation to soften from 3.6% to 3.5%. Higher-than-expected inflation numbers would align with recent ECB warnings of a higher-for-longer rate path.

After the Eurozone inflation numbers, the market focus will turn to the US economic calendar.

US Jobs Report in Focus

On Friday, the US Jobs Report will garner investor interest. A pickup in wage growth and a steady unemployment rate could temper market bets on a Q1 Fed rate cut. Significantly, economists forecast average hourly earnings to increase by 3.9% year-over-year in December versus 4.0% in November. Economists predict the US unemployment rate to rise from 3.8% to 3.9%.

While the Jobs Report will be the focal point, the US Services PMI also needs consideration. A pickup in service sector activity would ease fears of a hard landing. However, investors must look beyond the headline figure. The price, employment, and new order sub-components will also warrant investor consideration.

Economists forecast the ISM Services PMI to decline from 52.7 to 52.6 in December.

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