European retail sales fell for an eighth month in January as the global economic slump eroded consumer confidence and prompted households to curtail spending. Sales in the euro region fell 2.2 percent from a year earlier after a 2.4 percent decline in December, the European Union’s statistics office in Luxembourg said today. Economists forecast a 2.3 percent fall, according to the median of 17 estimates in a Bloomberg survey. From the previous month, January sales were up 0.1 percent. A separate report showed labor-cost growth slowed to 3.8 percent in the fourth quarter. “The overall downward trend will remain in place for a few more months at least,” said Marco Annunziata, chief economist at UniCredit MIB in London. “As unemployment rises, consumers will inevitably become more prudent in their spending behavior.” The worst global recession since World War II has led to tighter credit conditions and pushed euro-area unemployment to a two-year high, prompting households to rein in spending, particularly on durable goods. European car sales plunged 18 percent in February as demand for BMW, Opel and Mercedes-Benz models declined, the European Automobile Manufacturers’ Association said today. Consumer sentiment fell to the lowest in more than two decades last month while inflation eased to the slowest since 1999 as oil prices declined 70 percent from a July record. The European Central Bank, which cut interest rates to a record low of 1.5 percent last week, forecasts the euro-area economy will shrink about 2.7 percent this year. Lower Salaries “Consumers can get only partial relief from the drop in oil prices,” said Luigi Speranza, an economist at BNP Paribas in London. “As this fall is coupled with lower salaries and cuts on the labor market, there are negative consequences on consumer confidence and spending.” Carrefour SA, Europe’s largest retailer, yesterday said profit slid 45 percent in 2008 as it was forced to lower prices after being hit by a decline in consumer sentiment in its domestic French market. The Paris-based company, which has cut sales and profit targets twice in the past 12 months, also said is reviewing its operations in Italy and Belgium. The labor-cost report showed that wage growth slowed to 3.9 percent in the fourth quarter from 4.2 percent in the third. Other labor costs rose 3.6 percent. The 3.8 percent increase in overall expenses for labor was slower than the 4.2 percent advance in the prior quarter, the report showed.

Source