In July, Italy’s retail sales stayed the same, surprising many who expected a 0.4% rise. Over the three months leading up to July, retail sales grew by 0.6% in value and 0.1% in volume.

Year-On-Year Sales Growth

Compared to last year, retail sales climbed 1.8%, up from a previous estimate of 1.1%. In comparison to July 2024, large-scale distribution saw a 2.8% increase, small-scale retail rose by 0.6%, and non-store sales went up by 0.9%. Online sales grew by 2.9% year-on-year. Among non-food items, cosmetics and toiletries increased by 3.7%, while electric household appliances and audio-video equipment dropped by 3.1%. The lack of growth in Italian retail sales is concerning. It indicates that European consumers are losing steam. This flat performance, below expectations, suggests our earlier hopes for a strong third quarter might not be realistic. This serves as a warning sign for European stocks focused on the domestic market. Consumer weakness stems from the European Central Bank’s policies, which have kept interest rates above 3.5% for over a year. This data could push the ECB to consider rate cuts sooner than expected, possibly before the end of 2025. This is different from the US Federal Reserve, which is taking a more cautious approach.

Bearing In Mind Market Volatility

The Italian report isn’t alone; it follows last week’s news of a decline in Germany’s manufacturing PMI, which dropped to 48.5. Together, the slowing Italian consumer and weak German industry create a gloomy outlook for the Eurozone. We are entering a period of slowdown that seems to be quickening as autumn approaches. In light of this, buying put options on the FTSE MIB index may be wise, as it is highly influenced by domestic demand and the banking sector. The weak growth in retail suggests that the actual economic activity is weaker than reported. Historically, these kinds of discrepancies, similar to those seen in the slowdown of 2023, often foreshadow market corrections. This uncertainty can also lead to increased market volatility. The VSTOXX index, which measures volatility in Europe, has already risen to 15.6 this morning due to this news. Buying call options on the VSTOXX for October 2025 could be a smart way to benefit from the expected increase in market fluctuations. Moreover, the data is likely negative for the Euro. With a dovish ECB expected, we should consider short positions against the US dollar. Purchasing EUR/USD put options offers a way to limit risk while betting on the currency’s decline from its current level of around 1.09. The report also points to a cautious consumer who prefers cosmetics over pricey household appliances. This indicates a potential strategy: buying puts on consumer discretionary companies reliant on bigger sales while buying calls on consumer staples. This approach allows us to take advantage of the evident shift in spending habits. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now