Eurozone retail sales up for first time since July

AP News
Posted: Mar 03, 2011 7:06 AM
Eurozone retail sales up for first time since July

Retail sales in the 17 countries that use the euro rose in January for the first time in six months, official figures showed Thursday, in a tentative sign that consumers are finally confident enough to pick up spending.

Eurostat, the EU's statistics office, said retail sales increased by 0.4 percent on the month, marginally ahead of analysts' expectations for a 0.3 percent increase.

The rise was the first since July and made up for the 0.4 percent decline in December, when heavy snow across Europe prevented retailers enjoying the sort of Christmas boom they had been hoping for.

For the recovery to become more self-sustaining, analysts say that consumers will have to start spending more on goods and services. So far, the economic recovery from recession in the eurozone has been based on a big rebound in the industrial sector, with Germany's exporters doing particularly well.

"If the eurozone is to see decent growth in 2011, it really needs consumers to increasingly step up to the plate," said Howard Archer, chief European economist at IHS Global Insight.

Perhaps the most encouraging sign in the January figures was confirmation that Germany, Europe's biggest economy, saw its retail sales spike by a hefty 1.4 percent.

The data are unlikely to alter expectations that the European Central Bank will be keeping its main interest rate unchanged at the record low of 1 percent at the conclusion of its monthly meeting later Thursday.

All eyes will be on whether ECB president Jean-Claude Trichet sounds a more hawkish tone on inflation, which rose to 2.4 percent in the year to February largely because of higher energy and food costs. If he does, then markets may well move to price in an earlier than anticipated interest rate increase. At the moment, the markets expect the first rate hike in the latter part of 2011.

The ECB will also be publishing its latest projections about economic growth and inflation.

Separate figures from Eurostat confirmed that that the eurozone economy grew by 0.3 percent in the fourth quarter of 2011, held back somewhat by the adverse weather in December. Nevertheless, solid improvements were posted for both exports and household consumption.

Analysts remain wary of expecting too much from the eurozone this year, especially as a number of countries are enacting tough austerity measures in an attempt to get their public finances into shape.

"With the fiscal squeeze set to widen and intensify this year, the euro strong and the ECB threatening to hike rates, there are still good reasons to be cautious over the outlook for the region," said Ben May, European economist at Capital Economics.