Euro zone sales tumble at Christmas, no sign of growth

Fri Feb 3, 2012 6:38am EST
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By Robin Emmott

BRUSSELS (Reuters) - Retail sales in the euro zone tumbled unexpectedly in December, the biggest drop in the Christmas period in three years, data showed on Friday, with rising joblessness and stubborn inflation undercut signs of a stabilization in Europe's economy.

Sales across the 17-nation single currency area fell 0.4 percent in December from November, well down from the 0.3 percent rise forecast by economists in a Reuters poll.

They were down by 1.6 percent on an annual basis, the European Union's statistics office Eurostat said.

That annual drop was the biggest since December 2008 when retail sales also fell 1.6 percent in the month at what turned out to be the start of the world's biggest post-1930s recession.

European households cannot yet be relied on to help the euro zone pull out of its latest slump. Joblessness reached a euro-era high of 10.4 percent in December, while inflation remains near recent peaks of 3 percent.

Even in Germany, the bloc's biggest economy, sales fell 1.4 percent compared with November and shoppers stayed away from the malls in France and Spain, where sales slid 0.3 percent and 0.8 percent respectively. Consumer confidence is also weak, despite rising slightly in January from a 26-month low in December.

"We're not expecting any miracles from consumer spending this year, simply because we haven't got a high enough growth rate to generate jobs and stabilize the labor market," said Guillaume Menuet, an economist at Citigroup.

"The question is to what extent households draw down their savings to maintain consumption," he said.   Continued...