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Aug 6, 2009
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Euro zone June retail sales fall, demand low

By
Reuters
Published
Aug 6, 2009

BRUSSELS (Reuters) - Euro zone retail sales fell unexpectedly in June, data showed on Wednesday 5 August, pointing to weak consumer demand and posing a question mark over how quickly the economy will emerge from recession.



Retail trade in the 16 countries using the euro fell 0.2 percent on the month, European Union statistics office Eurostat said -- worse than the 0.2 percent increase expected by economists in a Reuters poll.

Sales fell 2.4 percent year-on-year.

The data, which came a day before the European Central Bank is expected to keep its main interest rate flat at 1.0 percent, showed that consumer demand continued to suffer from the worst recession since World War Two.

"Substantially higher and rising unemployment across the region means that serious concerns remain about the future strength of consumer spending," said Howard Archer, chief European economist at IHS Global Insight.

Unemployment in the euro zone rose in June to 9.4 percent, its highest in 10 years.

Some analysts said increased car sales, which are not part of the retail data and have been boosted by various government scrap schemes, may have taken spending away from other retail sectors.

"This might add to fears that stronger car sales related to scrapping incentives are coming at the expense of weaker high street spending," said Jennifer McKeown, European economist at Capital Economics.

SIGNS OF RECOVERY


Despite weak consumer demand, depressed also by tight credit, there have been signs of revival from exports and the industrial sector. A string of economic sentiment surveys have also shown improvement.

"If you are looking for signs of recovery, this is not the place to look. Other indicators like exports and the industrial sector are more important and are beginning to show signs of life," said Nick Kounis, analyst at Fortis.

Eurostat confirmed euro zone sales were pulled down by weak figures in Germany, the currency area's biggest economy, where retail trade fell 1.8 percent month-on-month and 2.0 percent annually.

In Spain, a country that is so far among the hardest hit by the crisis, monthly sales grew by 0.7 percent, although they fell by 4.3 percent year-on-year.

The euro zone's economy shrank 2.5 percent in the first three months of 2009, against the previous quarter. Contractions are expected to be smaller in subsequent quarters, with a modest revival in 2010.

Eurostat also revised its retail trade figures for May to a fall of 0.5 percent month-on-month and a decline of 3.0 percent annually from the previous readings of -0.4 and -3.3 percent.

In the wider, 27-nation European Union monthly retail sales increased by 0.1 percent for an annual fall of 1.7 percent. This reflected relatively strong figures in non-euro member Britain.

By Marcin Grajewski

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