Weak euro zone sales reflect fragile nature of recovery

Volume of retail trade drops 0.6 per cent in September

Wed, Nov 6, 2013, 15:15

Euro zone retail sales fell more than expected in September, data showed today, as shoppers held back with purchases amid a slow economic recovery weighed down by record high unemployment and tight access to credit.

The volume of retail trade fell 0.6 per cent on the month after a revised 0.5 per cent rise in August, the EU’s statistics office Eurostat said.

Sales of both food and non-food products fell and the volume of sales of automotive fuels was flat on the month. Compared with the same period last year, September retail sales were up 0.3 per cent, following three straight months of declines, the data showed.

Domestic demand in the euro zone is stifled by the bloc’s longest recession since the creation of the euro in 1999. It is also dented by record high unemployment of 12.2 per cent and uncertainty over when the economy will pick up more strongly.

The decline in retail sales was especially significant in the southern Europe, with Portugal recording an all-time low with a 6.2 per cent slump on the month and Spain’s 2.5 per cent decline was the biggest since April 2012.

Slovenia, now at risk of needing international financial assistance in case it fails to fix its banks and reform the economy, saw a 4.0 per cent fall month-on-month in sales in September, the biggest decline since February 2009.

The European Commission expects economic recovery to get on a slightly more solid footing next year, but domestic demand is still weak as more than 19 million people in the euro zone are out of jobs.

Weak consumer spending is also a concern for the European Central Bank which is expected to keep interest rates at record lows tomorrow despite a sharp drop in inflation, which fell to a nearly four-year lows in October.