Eurozone retail sales fell unexpectedly in September, highlighting weak consumer sentiment and raising questions about the basis for the region’s expected economic recovery.
Rising unemployment was blamed for the 0.7 per cent fall in sales from previous month, the biggest fall since October 2008.
Year-on-year sales were down 3.6 per cent, the 16th consecutive month of decline, according to European Commission figures.
A moderate growth in store sales had been expected by economists, after five months of falling or stagnating sales.
“The worse-than-expected retail sales figures for September demonstrate that the breeze of recovery is not yet felt in the retail sector,” said Martin van Vliet, economist at ING.
“Retail sales are unlikely to see a sustained recovery unless fears over unemployment subside. This, unfortunately, still seems some way off.”
The lacklustre figures show that consumer demand was not at the heart of the eurozone’s expected return to growth in the third quarter. Government spending and companies replenishing inventories were likely to be more sustained drivers, said analysts.
Nick Kounis, economist at Fortis, said the figures “are consistent with the idea that the recovery will be moderate over the coming quarters".
Rising joblessness was widely blamed for the depressed retail data.
“Although European unemployment hasn’t increased much compared to the US, the fear of what’s ahead is hurting retail sales,” the ING analyst added.
European Commission data showed that the numbers of hours worked in the eurozone fell even more than headline employment figures, because workers with jobs were seeing their hours cut by struggling employers. One in five eurozone workers is now part-time, according to the data.
Economists also raised fears that consumer spending figures would dip further when national “cash-for-clunkers” schemes came to an end.
The weak retail sales data were felt across most of Europe, with the Baltic states’ figures showing the biggest falls, and palpable growth in Austria and Slovakia.