By our Principal Economist Dr. Laura Galdikiene
With holiday shopping behind us, it’s time to take stock—how did the European retail sector perform at the end of 2024, and what lies ahead for 2025?
While we await December’s retail data, the picture so far suggests steady growth in retail trade, likely around 2% (real terms, seasonally and calendar-adjusted) in Q4. This momentum was largely driven by non-food sales, signaling steady demand across key categories. Notably, online sales saw a significant pickup towards the end of 2024, with October-November volumes expanding at an average annual growth rate of 6.7%, reflecting a strong shift toward e-commerce. Adding to this optimism, confidence in Europe’s retail sector improved towards year-end, fuelled by higher sales, leaner inventories, and brighter expectations for future performance.
But while retailers are seeing some positive signs, consumers remain cautious. Confidence among shoppers dipped slightly due to concerns over personal finances and broader economic uncertainties for the year ahead. Interestingly, optimism levels varied widely—Lithuanians (by far the most upbeat) and Swedes led the pack, while Greeks and Estonians were the most pessimistic.
Looking ahead, private consumption is expected to experience somewhat faster growth in 2025. Factors such as rising real household incomes, more favorable financial conditions, and a resilient labor market should provide some support. However, geopolitical tensions and policy uncertainties could temper consumer enthusiasm, keeping large-scale splurges off the table. As 2025 unfolds, businesses should prepare for a landscape defined by cautious optimism, heightened uncertainty, and uneven consumer sentiment across regions.
