Euro retail sales slide as consumer inflation fears mount

4th May 2011, Comments 0 comments

Consumers across Europe are shying away from shops, with March data revealing a sharp drop in retail sales in the eurozone's biggest and most powerful economy, Germany.

Retail trade across the 17-nation eurozone fell by 1.0 percent in March compared to February, when it had risen slightly against January -- with a dramatic decline in pre-bailout Portugal also emerging from new data released by the EU on Wednesday.

But it was the monthly slide of 2.1 percent for purchases by consumers in Germany that sounded alarm bells given the upward march of inflation recently and the prospect of another eurozone interest rate rise over the summer, if not on Thursday.

"German consumers get particularly worried about inflation so there is still the very real possibility that they will be very careful in their spending for now at least," warned London-based IHS Global Insight analyst Howard Archer, albeit he maintained that Germany "still seems well placed for a significant pick up in consumer spending in 2011."

According to the same Eurostat agency, eurozone inflation rose again in April to a level well above the fundamental European Central Bank target of just below 2.0 percent, hitting 2.8 percent.

"If the eurozone is to see sustained, decent growth in 2011, it needs consumers to increasingly step up to the plate," Archer underlined.

The biggest monthly drop was in Portugal, down 4.7 percent. This came in the tense run-up to Lisbon's formal request of a state bailout to eurozone partners, with households anticipating deep cuts in public spending and tax rises.

Big year-on-year collapses were observed for Portugal (6.8 percent) and Spain, where an unemployment rate of one-in-five contributed to a huge 9.6 percent fall.

Overall, the eurozone was also down 1.0 percent year-on-year, with the benchmark food, drink and tobacco sector posting a 2.1 percent drop in March compared to 12 months earlier but, equally worrying, the non-food sector showing a higher monthly fall of 1.1 percent.

This discrepancy suggested that "consumers were particularly reluctant to make discretionary purchases," Archer underlined.

In the full 27-state European Union, which also includes Britain and Poland, sales retreated by 0.8 percent.

© 2011 AFP

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