UPDATE: Euro-Zone Retail Sales Fell For Third Month

(Adds analyst comment.)

 
   By Paul Hannon 
   Of DOW JONES NEWSWIRES 
 

LONDON (Dow Jones)--Retail sales in the 16 countries that use the euro fell for the third straight month in September, indicating that, with unemployment on the rise, consumer spending has yet to provide a support to growth.

The European Union's statistics agency Eurostat Thursday said sales volumes in the euro zone fell by 0.7% in September from August and declined 3.6% from September 2008.

The decline in sales was unexpected, with economists surveyed by Dow Jones Newswires last week having estimated that sales grew by 0.1% on the month.

The August data were revised up slightly, and now show that sales fell by 0.1% on the month, having previously recorded a 0.2% drop.

The surprise fall in retail sales will serve as a reminder to members of the European Central Bank's governing council that, while there are signs that the euro-zone economy is picking up, a strong and sustained recovery is a long way off.

Consumer confidence has rebounded from its collapse early in the year, but rising unemployment will likely be a drag on spending for many months to come.

"The strength of the recovery will depend heavily on an improvement in consumer spending," said Jennifer McKeown, an economist at Capital Economics. "Recent German tax cuts and a pick-up in consumer confidence are encouraging and for now we expect a moderate consumer recovery next year. But with credit still weak and wage growth set to drop, the risks are on the downside."

The ECB's governing council meets Thursday, and is expected to leave its key interest rate unchanged at 1.0%, and take no other action to boost growth.

Sales of food and drink fell 0.9% on the month and 2.3% on the year, while nonfood sales sell 0.6% on the month and 4.1% on the year.

In the 27 members of the European Union, sales fell 0.4% on the month and fell 2.5% on the year.

Eurostat Web site: http://www.europa.eu.int/en/comm/eurostat

-By Paul Hannon, Dow Jones Newswires; +44 20 7842 9452; paul.hannon@dowjones.com

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(END) Dow Jones Newswires

November 05, 2009 05:28 ET (10:28 GMT)


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