Consumer caution weighs on Eurozone retail sales in July

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Consumer demand in the euro area softened in July, with retail sales moving lower. The volume of retail trade fell 0.6% month on month, reversing the 0.2% gain recorded in June. In the wider EU, retail sales were down 0.4%, after also having risen 0.2% the previous month.

On a year-on-year basis, activity was still marginally positive. Compared with July 2025, euro-area retail sales rose 0.6%, while the EU saw a 1.0% increase.

The monthly fall was mainly the result of softer non-food demand, with euro-zone sales in that category dropping 1.4%. Automotive fuel sales also decreased 0.8%, while food, drinks and tobacco spending added 0.4%, lending some support.

Germany proved the largest negative contributor to the regional total, as its retail sales fell 3.4% on the month. Spain followed with a 0.9% drop, and Italy and Poland each recorded a 0.3% decline. Latvia, Cyprus and Luxembourg, on the other hand, posted the strongest monthly increases.

For the ECB, these data do not shift the outlook; a 25 bps hike is still expected at the upcoming meeting, which would put the policy rate at 2.50%. Markets continue to price in an additional rate rise by the end of the year, although the central bank may suggest it would hold off on more tightening unless core inflation shows a clear pickup.