Eurozone retail sales drop 1.2 percent in November

[February 04, 2010]  LONDON (AP) -- Retail sales in the 16 countries that use the euro unexpectedly fell in November, official figures showed Thursday, further denting hopes that consumer spending will help drive the region's economic recovery in the future.

Figures from Eurostat, the EU's statistics office, showed that eurozone retail sales were down 1.2 percent in November from the previous month, in sharp contrast to the 0.2 percent increase recorded in October and analysts' expectations for another modest monthly rise.

Eurostat said declines were reported in both the food and non-food sectors, with the latter falling by a particularly sharp 1.6 percent during the month.

The figures reinforced expectations that the recovery from recession in the eurozone will be slow. So far, the modest economic growth being recorded has been largely due to a pick-up in global trade volumes, which has boosted exports, particularly in Germany, the single currency bloc's largest economy.

Figures on Friday are expected to confirm that the eurozone economy grew by 0.4 percent in the third quarter.

However, analysts say that domestic demand will need to take a bigger role for the pace of recovery to accelerate.

Thursday's figures suggest consumer spending in the October-December quarter is unlikely to be much better than the 0.2 percent quarterly decline reported in the previous three-month period.

"The hope is that German tax cuts, improving sentiment and early signs of stabilisation in the labor market will prompt a pick-up this year, but the improvement looks set to be modest," said Jennifer McKeown, senior European economist at Capital Economics.

For the 27-country EU as a whole, which includes non-euro members like Britain and Sweden, retail sales were down 0.8 percent in November, more than offsetting the 0.5 percent increase recorded in October.

In a separate report, the European Commission said economic sentiment in the eurozone improved further in December, with both consumer and industrial confidence rising modestly.

The Commission said its main indicator for economic sentiment rose by 2.5 points to an 18-month high of 91.3, slightly above analysts' expectations for an increase to 91. The equivalent indicator for the EU swelled by 4.1 points to 92.

Both areas have witnessed nine consecutive monthly increases since the trough in March. Despite those advances, both indictors remain below their long-run averages.

The market impact of Thursday's figures largely offset each other, with the euro trading flat around the $1.4350 after the release of the data.

[Associated Press; By PAN PYLAS]

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