Euro zone retail trade fell more than expected in April in another sign of slowing economic growth as expensive oil and food hit consumers' spending power, boosting the case for interest rates to be kept on hold or cut.
Retail sales, an indication of consumer demand, fell 0.6 per cent month-on-month in the 15 countries using the euro for an annual decline of 2.9 per cent, the European Union statistics office said today.
Economists polled by Reuters had expected a 0.2 per cent monthly rise and a 0.6 per cent fall year-on-year.
"Rising food and energy prices are hurting household purchasing power and undoing the positive stimulus from accelerating wage growth and healthy, but slowing job growth," said Nick Kounis, senior economist at Fortis.
Eurostat also revised its retail sales figures for March downwards to a 0.9 per cent fall month-on-month and a 2.3 per cent decline on the year, compared with the previous reading of 0.4 per cent and 1.6 per cent decreases.
In April, sales of food, drinks and tobacco fell the most, by 1 per cent from March and 3.4 per cent year-on-year.
Germany saw the biggest decrease in the indicator, posing a question mark over the economic outlook for the euro zone's biggest economy, whose expansion has supported the currency area's growth in recent months as the USeconomy slowed.
European Commission data last week showed consumer confidence in May hit its lowest level since September 2005, though overall economic sentiment stabilised, compared with April.
Inflation hit a record high of 3.6 per cent year-on-year in May.
With the US economy slowing sharply in the wake of the subprime mortgage crisis and a strong euro hurting euro zone exports, domestic demand is seen as important to underpin slowing euro zone expansion.
Eurostat revised today the euro zone's gross domestic product growth to 0.8 per cent quarter-on-quarter in the first three months of the year from 0.7 per cent, but economists say the second quarter will be much worse.