Business | Retail
Consumer spending drops in Eurozone
High unemployment is a major factor
- Bloomberg
- Published: 00:00 February 7, 2012
Brussels: European retail sales unexpectedly fell in December, led by Germany and France, as unemployment at a 14-year high and government spending cuts sapped consumer demand.
Sales dropped 0.4 per cent in the month after a similar decrease in November, the European Union's statistics office in Luxembourg said yesterday. Economists had forecast a gain of 0.3 per cent, the median of 16 estimates in a Bloomberg News survey showed. Sales slipped 1.6 per cent from a year earlier.
European households may cut spending as governments step up austerity measures to contain the region's fiscal crisis just as companies start to eliminate jobs.
Euro-region unemployment held at 10.4 per cent in December, the highest in almost 14 years, suggesting the region's worsening debt crisis and cooling economic growth have prompted companies to cut jobs.
"The prospects for Euro-zone consumer spending still look far from promising in the near term at least," said Howard Archer, chief European economist at IHS Global Insight in London. "Despite inflation starting to retreat across the Eurozone, consumers' purchasing power is likely to remain limited in many countries from muted wage growth and tighter fiscal policy."
German retail sales fell 1.4 per cent from November, when they dropped 1 per cent, yesterday's report showed. Sales in France and Spain declined 0.3 per cent and 0.8 per cent, respectively.
The euro was little changed after the data were released, trading at $1.3175 in Brussels, up 0.2 per cent.
Finance ministers of the AAA rated countries using the euro — Germany, Luxembourg, the Netherlands and Finland — are set to meet today in Berlin as European leaders try to end the crisis.
With the turmoil undermining the recovery and global export demand cooling, European Central Bank council member Ewald Nowotny said on January 30 the euro-area economy may fail to grow or show a "recession in certain phases" of this year.
The ECB, which has forecast inflation to slow this year, will hold its next rate assessment on February 9. The central bank has cut its interest rates twice over the past three months, bringing the benchmark to one per cent, matching a record low.
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