Euro zone retail sales surprised on the upside of expectations in April. On a monthly basis, retail sales rose by 0.9% M/M, after a 0.9% M/M decline in March, while the consensus was looking for an increase by only 0.3% M/M. The breakdown shows that sales of both food, drink & tobacco (0.7% M/M) and non-food products (0.8% M/M) jumped in April, probably boosted by Easter and the Easter Holidays. Due to the late timing of Easter and the Easter Holidays, they were probably not fully captured by the seasonal adjustment factors. National data show a strong rebound in Portugal (2.9% M/M) and retail sales were also strong in Belgium (2.0% M/M), France (1.4% M/M), Spain (0.8% M/M) and Germany (0.6% M/M). Retail sales rose at the sharpest monthly pace in more than a year, which is an encouraging sign and a good start to the second quarter, but we fear that a fall-back is likely in May after the Easter-related boost in April.
German factory orders rebounded by 2.8% M/M in April, beating the market consensus which was looking for an increase by 2.0% M/M. The previous figure was significantly upwardly revised, from -4.0% M/M to -2.7% M/M. The details show that the rebound was led by orders from foreign non-euro zone countries (5.3% M/M), but also domestic orders rose significantly (by 2.1% M/M). Orders from other euro zone countries show a more moderate increase (by 0.7% M/M). Orders for capital (4.9% M/M) and consumer (3.6% M/M) goods rose sharply in April, but intermediate goods orders fell slightly (-0.3% M/M). The most recent manufacturing PMI showed a significant slowdown in activity, suggesting that growth has peaked in the first quarter, which will probably translate soon into an easing in orders.