Falling Eurozone Retail Sales Underscore The Softness Of Household Consumption

By Peter Vanden Houte of ING Think

Economic and Financial Analysis • Aug 6, 2026 at 6:35 AM EDT

Eurozone retail sales fell by 0.3% in June, reinforcing the view that consumption was not a major driver of growth in the second quarter.

Some improvement can be expected, but a genuine consumption boom looks unlikely at this stage.

Source

Consumption ended the second quarter on a soft note

Eurozone retail sales fell by 0.3% month-on-month in June, following a 0.4% increase in May. On a year-on-year basis, the pace of growth slowed from 1.9% to 0.7%. Although retail sales account for only about a third of total consumer expenditure, they remain an important proxy for household consumption. On that basis, the second quarter ended on a rather subdued note for the consumer.

As the ECB discussed in its monthly bulletin, higher energy prices have weighed especially heavily on lower-income households, which have a more limited ability to smooth consumption over time. At the same time, higher-income households may have scaled back discretionary spending in response to elevated uncertainty.

Some improvement likely

Today’s figures underline that, unlike in the US, the European consumer has not been a major engine of growth recently. So where does this leave us? Uncertainty surrounding the outcome of the Middle East conflict has not fully disappeared, although energy prices have eased.

According to the European Commission’s economic sentiment survey, employment expectations improved significantly in July. This should provide some support to consumption in the third quarter, even if it is going too far to forecast a consumption boom. For that to happen, a more meaningful decline in the savings ratio would be needed, which looks unlikely in the near term.

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