Retail sales in the eurozone rose for the first time in four months during December, according to European Union statistics agency data on Wednesday, while surveys of purchasing managers indicated that economic activity slowed less sharply than first estimated as 2016 began.
The data suggests that economic growth has continued at the same moderate pace set since the start of the recovery in mid-2013. So far, the expansion hasn’t been strong enough to lift inflation, and there is no reason to expect that to change. Underlining that message, the surveys of purchasing managers found that businesses cut their prices at the fastest pace since March 2015.
In combination, those developments are likely to worry policy makers at the European Central Bank, who have already signaled their concern about the impact of lower oil prices on the outlook for inflation, and slowdowns in China and other large developing economies on the outlook for economic growth.
The data suggest the boost to households’ disposable income from lower oil prices continued to support their spending on other goods and services—a key driver of the recovery over the past year.
Also Wednesday, data provider Markit said a headline measure of activity based on surveys of 5,000 companies around the eurozone, known as the composite purchasing managers index, fell to 53.6 in January from 54.3 in December. A reading above 50.0 indicates an increase in activity, while a reading below that level indicates a decline. Markit had initially estimated the PMI fell to 53.5.
That reading is consistent with economic growth of 0.4% in the first quarter of 2016, according to Markit, despite the turmoil in financial markets and worries about the fate of China.