Eurozone Retail Sales Unexpectedly Drop In September

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Eurozone retail sales unexpectedly fell in September, suggesting that the sector is yet to get a boost from the economic recovery that is underway.

Retail sales declined 0.7% month-on-month in September, after a revised fall of 0.1% in August, data released by the Eurostat showed Thursday. Economists were looking for an increase of 0.2%. Year-on-year, retail sales were down 3.6% in September, compared to a revised 2.3% fall in August.

"The worse-than-expected retail sales figures for September demonstrate that the breeze of recovery is not yet felt in the retail sector," ING economist Martin van Vliet said. "They also suggest that overall private consumption in the national accounts will likely have fallen back again in Q3."

The ING economist said the recent upturn in consumer confidence would seem to point to some modest improvement in retail sales over the coming months. But, retail sales are unlikely to see a sustained recovery unless fears over unemployment subside.

Sales of food, drinks and tobacco declined by 0.9% in September compared with the previous month. Non-food sales dropped 0.6%.

Retail sales figures suggest that the role of private consumption would be less in the expected Eurozone economic recovery in the third quarter. Meaning, billions of government spending would have contributed most to propel growth in the third quarter.

The Eurozone economy probably exited the worst recession in the third quarter. According to an interim forecast by the European Commission, published on September 14, Eurozone would grow 0.2% in the third quarter and by 0.1% in the fourth quarter.

On Tuesday, an autumn forecast from the Commission showed that the 16-nation bloc is set to contract 4% this year, unchanged from its interim economic forecast. The commission sees a gradual recovery with GDP growing 0.7% in 2010 and around 1.5% in 2011. The commission raised its forecast for 2010 from the 0.1% GDP decline predicted in its Spring forecast. The Eurostat is due to publish flash estimate for the third quarter GDP on November 13.

In the EU27, retail sales fell 0.4% month-on-month and fell 2.5% year-on-year. Among the member states for which data were available, total retail trade rose in six and fell in eleven. The highest increases were observed in Austria followed by Slovakia, while Lithuania, Estonia, Portugal recorded largest decreases.

Retail sales data came as the European Central Bank is set to announce its interest rate decision at 7.45 am ET. The central bank is expected to hold key interest rate at a record low of 1%.

Eurozone retail sales unexpectedly fell in September, suggesting that the sector is yet get a boost from the economic recovery, which is underway. (Market News Provided by RTTNews)