A drop in sales of food, drinks and tobacco depressed April retail sales in the euro zone for an annual fall of 0.9 per cent after a rebound in the last two months, the European Union statistics office said today.
The decline was not expected by economists, who in a Reuters poll forecast a 0.4 per cent annual rise in retail sales in April and a 0.1 per cent month-on-month gain.
Compared with March, retail sales in the 12-nation euro zone dropped 1.2 per cent in April, with sales of food drinks and tobacco down 1.6 per cent.
In the 25-nation EU, retail sales eased 0.3 per cent year-on-year, pulled down by a 9.4 per cent slump in Poland, a 5.3 per cent decline in Portugal and a 3.1 per cent fall in Luxembourg.
The retail sales data, which reflect consumer demand, is in line with recent poor business and consumer confidence indicators and economists' expectations of a sharp slowdown in growth in the second quarter.
The European Commission, which this week cut its forecast for second quarter growth for the second time to a range of 0.1-0.5 per cent, believes euro zone consumer spending is key for growth rates to pick up.
On Thursday the European Central Bank cut its 2005 growth forecast to 1.4 per cent from 1.6 per cent, the forecast still maintained by the commission.
But with unemployment in the euro zone stuck at around 8.9 per cent, high oil prices and the still relatively strong euro, businesses and consumers are reluctant to invest and spend.