gertrude tumpel - gugerell : retail sales from a euro area perspective speech by ms gertrude tumpel - gugerell, member of the executive board of the european central bank, at the world retail congress, berlin, 25 october 2010. * * * it is a great pleasure for me to be here in berlin today at the world retail congress. retail sales constitute about 45 percent of private consumption, which in turn amounts to a share of almost 60 % of gdp. thus, retail sales alone explain around 30 percent of aggregate demand in the euro area. these impressive figures are enough to underline the importance of the retail sector for the overall economy. as you know, the primary objective of the ecb ’ s monetary policy is to maintain price stability. the governing council of the ecb aims at keeping inflation rates below, but close to, 2 % over the medium term. in order to reach this objective we must assess the inflation outlook continuously. we form our view on future inflation by closely following and monitoring a wide range of indicators that affect inflation and the economy ’ s output of goods and services. retail sales is one of those indicators and certainly – as the figures above show – an important one. in my presentation i would like to briefly touch on three questions : 1. how was the retail trade sector affected by the crisis? 2. how do – in general – financial variables and monetary policy affect private consumption and retail trade? 3. and, what is – in our view – the future outlook for the retail trade sector? let me turn to the first question on how sales in retail shops and stores were affected by the crisis. in chart 1 you see the annual rate of change in the volume of euro area retail sales alongside with private consumption and gdp. you see that retail sales move clearly in tandem with private consumption and gdp. as gdp and consumption declined in the recent recession, so did retail sales. during the crisis, households drew back on consumption, hence private consumption growth slowed down on the basis of lower growth in incomes, reflecting mainly weak employment growth. we can see in chart 2 that the low growth in real disposable income was mainly driven by the decline in overall employment. real compensation per employee, in contrast, contributed positively in 2009 – mainly due to the low inflation rates during that time – before stagnating again in the beginning of this year. in addition, financial wealth declined in 2008, thereby further depressing consumption growth. another key deter

1 january. it is because europeans have seized the opportunity to play an active part in the euro changeover that we can already pronounce this unprecedented move a tremendous success. with the introduction of the euro banknotes and coins, the euro has ceased to be a currency familiar only to the financial markets, to financial institutions and large enterprises. on 1 january at 00. 00 hour, the introduction of the euro banknotes and coins marked not only the completion of economic and monetary union, which is a crucial achievement in itself, but one of the major, if not the major step forward in the history of european integration. i am convinced that 1 january 2002 will appear in the history books in all our countries and beyond as the start of a new era for europe.