The retail sales in Europe slumped from 52.4 on gauge scale in February 2008 to 48.2 in March 2008 as consumer spending went down.

The retail sales in Europe slumped from 52.4 on gauge scale, used for measuring retail sales, in February 2008 to 48.2 in March 2008 owing to shattered consumer confidence in all the European countries, as per the Bloomberg purchasing managers index, as reported by Bloomberg.

Bloomberg also revealed that Europe’s two major economies, France and Germany, too witnessed slowdown in retail sales. Besides, the retail sales in Italy fell to its lowest level of 36.4 from 43.8 since 2004 when the index was introduced. Even the consumer confidence in Europe was at its lowest level in last two years (March 2006).

In March 2008, the European retail sales significantly dropped because of economic recession in the continent on the back of rising credit cost and US slowdown that severely affected the companies and consumers. Apart from this, rising inflation cut down household expenses on electronics, clothing, and cars, reducing the disposable income. Food and energy prices have substantially gone up, driving down the consumer spending in the region.

Another chief factor that took a toll on consumer spending was bad weather in Europe as people preferred to stay in their homes instead of going out to shop. The impact of falling home prices too soaked the retail sales as people were engaged in meeting with home dealers and manufacturers to buy new homes. Moreover, the region is facing high unemployment rate (in turn, low wages) that subsequently pull down consumer spending to the lowest level.

The European Central Bank and European Commission revised their growth forecast for 2008 and predicted a new growth rate of 1.4% that is the lowest since 2003. They also predicted that economic growth rate would remain below trend till the second quarter of 2009.

According to a Research Analyst at RNCOS, “Europe’s retail sales are falling as major economies of the region are facing slowdown. Nevertheless, banks’ decision to cut down interest rate might bring some relief and push up the consumer spending. If consumer spending revives, then it will bring cheer for the European retailers who are struggling to expand sales.”