Moody’s releases upbeat report on European economy

Despite uncertainty in Greece and Ukraine, credit rating agency Moody’s says consumer trend in Europe is rising

Photo by: AP
Photo by: AP

Shoppers walk past a shop window saying "Merry Christmas", Berlin, December 11, 1996


Continuing growth in European retail sales marks a spurt in consumer confidence in the region as the economy recovers, credit agency Moody's reported on Wednesday.

"Stronger consumer confidence and continued GDP gains will underpin modest European retail sector growth of slightly below 1 percent in the euro area and around 1.5 percent in the UK over the next 12-18 months," said the report entitled "Retail -- Europe: Sales Growth To Continue But Not Strongly Enough To Change Stable Outlook".

Growth is increasing despite continued uncertainty in Greece and Ukraine, according to the report. Russia, currently in a recession, is the only country where sales will not grow.

"With consumer confidence at its highest point in many countries since the global recession and economic growth expected to continue across Europe, we expect the extra cash at consumers' disposal to translate into higher sales for retailers," said the report. "We expect that consumers will choose to spend more on luxuries and treats like holidays than to revert to their pre-downturn spending habits."

Moody's forecasts modest sales growth in all major European markets over the next 12-18 months, driven by a return of GDP growth in Spain, Portugal and Italy are also seeing continued solid economic growth.

But, in the UK, while retail sales are expected to grow moderately and could still outpace the rest of Europe, a potential interest rate rise in early 2016 could dampen demand for big ticket items such as cars, furniture and home improvements.

Moody's warned, however, that the European sector remains vulnerable to risks, such as a potential escalation of the crisis in Ukraine or the evolving situation in Greece.

"In addition, the continued weak euro still weighs on most euro area retailers, although low commodity prices have largely offset the negative impact of more expensive imports from countries outside the single currency," the report said.