11:21 AM EDT, 07/07/2025 (MT Newswires) -- Eurozone retail sales were strong at the beginning of the year, suggesting that despite consumer unease, stronger wage growth was still translating into a sales uptick, said ING.

However, May's numbers provide a reality check as sales fell by 0.7% on the month, wrote the bank in a note. Although this decline may be partly due to the timing of holidays, it lowers the overall trend.

The potential for a retail sales rebound remains significant, though as purchasing power continues to recover in the eurozone, stated ING. The problem for now is that saving rates have continued to increase due to high uncertainty.

Consumer confidence is currently low, which can have a lasting impact on sales in European retail districts, pointed out the bank.

Eurostat has also released broader services data for April on Monday, indicating that production in services started Q2 on the wrong foot. The decline of 0.3% compared with March was mainly driven by a strong decline in ICT and real estate activities. The question is whether this is going to last longer.

The PMI for services showed some improvement for June, but was more in line with stagnation, not recovery.

Now that ING sees service sector weakness in the hard data, this confirms its view that Q2 GDP growth may well have been negative. Especially if one considers a reversal of the frontloading of United States imports, which could negatively affect the trade channel.

After the strong Q1, GDP in Q2 will likely be a reality check for economic activity. The overall trend continues to be sluggish, according to ING.

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