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Valentina Romei in London

A decline in Italy’s retail sales ended two months of improvement to raise fears for the fragility of recovery in the eurozone’s third-biggest economy that risks widening the region’s north-south gap.

Sales fell 2.2 per cent in July compared with the previous month, marking a setback from June’s 12 per cent expansion. The monthly figure means that retail sales in July were 7.2 per cent below the same month last year, official data showed on Tuesday.

Recent figures “show that the pace of recovery is likely to slow significantly beyond the ‘mechanical’ bounce in activity seen in the third quarter”, said Nicola Nobile, economist at Oxford Economics. “Overall, we maintain our view that, after the strong rebound in the third quarter, the subsequent quarterly gains in the Italian economy in the fourth and through 2021 will be much more modest.”

Online shopping rose 11.6 per cent as coronavirus-hit consumers stuck at home took to their computers to buy goods, the national statistics office said. Overall sales dropped nonetheless, while food sales were broadly unchanged from last year.

Non-food goods especially clothing and household appliances fell, the Italian statistical agency Istat said.

“Looking at the value of sales for non-food products, dramatic falls were reported across all categories,” Istat said.

The setback in Italy’s retail spending raises concerns of a slowdown in the economic recovery after the historic fall in output in the second quarter.

Industrial output is recovering more quickly than expected, but the dominant services sector is suffering from reduced international tourism and fears of unemployment once the government’s support scheme ends.

Data for other European countries have shown a correction in retail spending in July after a large rebound in June. Germany, the region’s largest economy, reported a 0.9 per cent drop in sales, compared with the previous month.

However, in France and Germany, July’s retail sales were stronger than in the same month last year, while for Italy – and to a smaller extent in Spain – the drop came before reaching pre-pandemic levels, fuelling concerns that an uneven economic recovery could widen the north-south economic gap.