GO
Loading...

Fall in fuel spending holds back euro zone sales

Wednesday, 3 Oct 2012 | 5:06 AM ET

* Retail trade rises 0.1 pct in August from July

* July sales revised up 0.1 pct from initial 0.2 pct loss

By Robin Emmott

BRUSSELS, Oct 3 (Reuters) - Retail sales in the euro zone barely rose in August as motorists cut back on spending on fuel during the normally busy driving months of the European summer, reflecting the weak economy as it heads into recession.

High oil prices forced consumers in the 17-nation currency area to reduce fuel spending, which held back the volume of retail trade, which rose just 0.1 percent in the month compared to July, the EU's statistics office Eurostat said on Wednesday.

That was slightly better than expected by economists in a Reuters poll, who forecast volumes falling 0.1 percent in August. The annual reading was also better than the consensus forecast, as sales fell only 1.3 percent compared to expectations of a 2 percent drop.

Households in the euro zone have been struggling since the global financial crisis of 2008/2009 and only saw their disposable incomes grow during the brief recovery of 2010. With consumer spending a major part of the euro zone's economy, that weakness has fed back into the downturn, and the bloc's output is expected to shrink at least 0.3 percent this year.

Meanwhile, high world oil prices driven up by tensions over Iran's nuclear ambitions have kept euro zone inflation at well above the European Central Bank's 2 percent target.

Those high prices at a time of economic recession put off consumers from spending on fuel even during the busiest driving months of the year and the volume of automotive fuel sales fell 0.7 percent in August after falling 0.8 percent in July.

In a sign that the impact of the euro zone's debt crisis has reached the bloc's wealthiest economies, retail sales volumes fell 0.8 percent in France and showed no growth in Belgium. In Germany, sales rose just 0.3 percent, as slowdowns in Berlin's trading partners in the euro zone and China, as well as the weak recovery in the United States, have started to dent its economic performance.

High oil prices and stubborn inflation mean economists do not expect the European Central Bank to cut rates to a new record low at its meeting on Thursday, which in theory would make it cheaper for the euro zone's households to borrow.

"A reduction in the key ECB policy rates is not high on the agenda at the moment," said Daniele Antonucci, an economist at Morgan Stanley in a research note. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a graphic on GDP: For a graphic on banks: ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Robin Emmott)

((brussels.newsroom@thomsonreuters.com)(+32-2-287-6830))

Keywords: EUROZONE RETAIL/