Eurozone retail sales dip again
By Pan Pylas |
April 9, 2010, Friday
|
Print Edition
Print Edition
Retail sales in the 16 countries that use the euro fell once again in February, official figures showed yesterday, reinforcing concerns that consumer spending will remain the weak link in the economic recovery.
Eurostat, the EU's statistics office, said retail sales in the eurozone dropped by 0.6 percent from the previous month. That was the second straight drop this year and undermines hopes that the eurozone economy is poised for a solid return to growth in the first quarter of 2010 after stagnating in the last three months of 2009.
The decline in February was unexpected - the consensus in the markets was for a flat reading during the month.
The downbeat figures will also likely cement market expectations that the European Central Bank will not be raising interest rates for much, if not all, of this year.
Consumer gloom
For the recovery to become more rooted, analysts think consumers have to step up and provide the wider economy with another pillar for growth alongside the export of goods.
However, with unemployment standing at around 10 percent of the working population, wage growth subdued and car scrappage schemes across the eurozone coming to an end, the prospects for a marked pickup in consumer spending are considered slight.
In addition, big budget cuts in a number of countries such as Greece, Spain and Portugal are unlikely to help.
"With February's marked drop in retail sales maintaining concerns about the future of consumer spending across the eurozone, there remains a compelling case fro the ECB to keep interest rates down at 1 percent not only at its April policy meeting today (yesterday) but also for many more months to come," said Howard Archer, chief European economist at IHS Global Insight.
"We now expect the ECB to hold off from raising interest rates until 2011 and to tread very lightly over the coming months in withdrawing its emergency liquidity measures," Archer said.
Eurostat, the EU's statistics office, said retail sales in the eurozone dropped by 0.6 percent from the previous month. That was the second straight drop this year and undermines hopes that the eurozone economy is poised for a solid return to growth in the first quarter of 2010 after stagnating in the last three months of 2009.
The decline in February was unexpected - the consensus in the markets was for a flat reading during the month.
The downbeat figures will also likely cement market expectations that the European Central Bank will not be raising interest rates for much, if not all, of this year.
Consumer gloom
For the recovery to become more rooted, analysts think consumers have to step up and provide the wider economy with another pillar for growth alongside the export of goods.
However, with unemployment standing at around 10 percent of the working population, wage growth subdued and car scrappage schemes across the eurozone coming to an end, the prospects for a marked pickup in consumer spending are considered slight.
In addition, big budget cuts in a number of countries such as Greece, Spain and Portugal are unlikely to help.
"With February's marked drop in retail sales maintaining concerns about the future of consumer spending across the eurozone, there remains a compelling case fro the ECB to keep interest rates down at 1 percent not only at its April policy meeting today (yesterday) but also for many more months to come," said Howard Archer, chief European economist at IHS Global Insight.
"We now expect the ECB to hold off from raising interest rates until 2011 and to tread very lightly over the coming months in withdrawing its emergency liquidity measures," Archer said.
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