German Retail Sales are expected to come to a standstill in May with annualized receipts falling for the fourth consecutive month, this time by -1.5%. Deepening turmoil in the labor market has weighed on disposable incomes, trimming spending and encouraging precautionary saving. Indeed, the unemployment rate rose to 8.3% in June, the highest in 16 months, and is expected to average around 10% through the end of 2010 according to the International Monetary Fund. Consumption is the largest contributor to overall economic growth, meaning the chance of a substantive recovery in GDP growth is unlikely in the months ahead, both for the Euro Zone’s largest economy and the currency bloc as a whole. The prospect of deepening recession and an increasingly credible deflationary threat have boosted expectations that the European Central Bank will cut interest rates later this week, with overnight index swaps suggesting the market now sees a 59.9% chance of a 25 basis point reduction.

Related Article: Euro Volatility Likely as Central Bank Delivers Interest Rate Decision

Tags: Euro, Euro Zone, European Central Bank, GDP, Germany, interest rates, Retail Sales, unemployment

This entry was posted on Tuesday, June 30th, 2009 at 11:04 pm and is filed under Currency Trading, Economic Indicators, Economy, Euro. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.