Although Portugal has seen a decline in consumer sentiment, the country’s retail market continues to post strong labour market data and retail sales. Portugal scored 121 by the GRAI. Germany also continues to rank among the top performers, with 120 points (-3 points).
Henrike Waldburg, head of investment management at Union Investment, explains:
“Buoyant consumer sentiment in Germany, backed by solid retail sales figures and labour market data, is encouraging foreign institutional investors to consider the German retail sector for opportunistic investments, despite stagnating rents.”
“At 113 points each, Spain and Ireland are on the right track, having further narrowed the gap to the leading trio. Spanish retailers, especially in Madrid and Barcelona, have been posting positive data for around four years now. Spain’s share of exposures is likely to rise significantly from its current very low level over the medium term.”
Overall, while trade disputes, the Brexit debate and a general economic slowdown have impacted consumer and retailer sentiment, the retail index for the 15 largest European markets, held up relatively well in the second quarter of 2019.
“Investors tend to punish markets too severely due to political turmoil, yet the reality in some markets, such as Italy or Spain, is rather different. There is still scope in Europe for opportunistic investments in the current market environment.”
The EU-15 index remains above average, at 112 points, with a slight drop of three points compared to the second quarter of 2018 (115 points). The same applies to the North America index (107 points; -8 points) and Asia-Pacific index (103 points; -7 points). European job markets are highly supportive.
The relevant indicator stands at 115 points, confirming the robustness that has been a feature for five years now. The associated strong consumer sentiment across large parts of Europe helps to underpin the retail index.
Elsewhere, the biggest losses were posted by the Czech Republic. Six months ago, the Czech Republic was ranked above the German retail market. Its significant, rapid decline across all four indicators dragged the Czech Republic down by 15 points to 110, relegating it to eighth place in the latest EU-15 ranking. Belgium and Sweden are both performed much worse.
By adding one point each, the UK and Italy are the only countries that have improved their performance over the same period of the previous year. At 107 points in the second quarter of 2019, the UK was on a par with France, whose retail markets softened slightly (-2 points) to reach a more or less average level. The score for the UK amid the turmoil of Brexit only seems surprising at first sight.
“The Brexit decision has not created a new reality yet, either for consumers, the labour market or for retail sales. If the UK experiences the expected dramatic slump in GDP, the retail sector will be the most directly affected, along with logistics and probably also the hotel industry.”