The trend lines: While the European economy appears headed toward a recession, the US economy may manage to achieve a so-called soft landing in which growth is moderate but positive, and unemployment rises modestly.
- Eurozone households’ retail spending in October fell 1.8% month-over-month (MoM), the largest MoM decline since July 2021, according to Eurostat. On an annualized basis, spending declined 2.7%.
- By contrast, US retail sales rose 1.3% MoM in October, thanks in part to Amazon, Walmart, and others pushing high-profile promotions as they attempted to pull holiday demand earlier than ever, per the US Commerce Department. On an annualized basis, retail sales jumped 8.3%, outpacing the rate of inflation.
Europe’s unique challenges: The war in Ukraine, and Russia’s attempt to weaponize energy by shutting off the flow of gas through a key pipeline to Europe, sent energy costs soaring 41.5% YoY in October and 34.9% YoY in November.
- That’s driven retailers to make changes such as lowering the temperature in their stores and switching off lights in shops earlier at night or in unoccupied areas of their stores.
- Some are turning to layoffs. H&M recently cut 1,500 of its roughly 155,000 employees to help it balance weak sales in several key markets as well as rising raw material and freight costs.
- A survey by the German Retail Federation (HDE) of 500 companies found more than half expected this holiday sales period would be worse than last year, and 21% feared it would be considerably worse.