European retail sales unexpectedly fell in December, led by Germany and France, as unemployment at a 14-year high and government spending cuts sapped consumer demand.
Sales dropped 0.4 percent in the month after a similar decrease in November, the European Union’s statistics office in Luxembourg said today. Economists had forecast a gain of 0.3 percent, the median of 16 estimates in a Bloomberg News survey showed. Sales (RSWAEMUY) slipped 1.6 percent from a year earlier.
European households may cut spending as governments step up austerity measures to contain the region’s fiscal crisis just as companies start to eliminate jobs. Euro-region unemployment held at 10.4 percent in December, the highest in almost 14 years, suggesting the region’s worsening debt crisis and cooling economic growth have prompted companies to cut jobs.
“The prospects for euro-zone consumer spending still look far from promising in the near term at least,” said Howard Archer, chief European economist at IHS Global Insight in London. “Despite inflation starting to retreat across the euro zone, consumers’ purchasing power is likely to remain limited in many countries from muted wage growth and tighter fiscal policy.”
‘Recession in Certain Phases’
German retail sales fell 1.4 percent from November, when they dropped 1 percent, today’s report showed. Sales in France and Spain declined 0.3 percent and 0.8 percent, respectively.
The euro was little changed after the data were released, trading at $1.3175 at 11:23 a.m. in Brussels, up 0.2 percent.
Finance ministers of the AAA rated countries using the euro -- Germany, Luxembourg, the Netherlands and Finland -- are set to meet today in Berlin as European leaders try to end the crisis. With the turmoil undermining the recovery and global export demand cooling, European Central Bank council member Ewald Nowotny said on Jan. 30 the euro-area economy may fail to grow or show a “recession in certain phases” of this year.
The ECB, which has forecast inflation to slow this year, will hold its next rate assessment on Feb. 9. The central bank has cut its interest rates twice over the past three months, bringing the benchmark to 1 percent, matching a record low.
While European unemployment remains high, employers in the U.S. probably increased payrolls in January, a sign companies are gaining confidence the country’s expansion will weather Europe’s slump, economists said before a report today.
‘Respectable Pace’
Employment grew by 140,000 after rising by 200,000 in December, according to the median forecast of 89 economists surveyed by Bloomberg News. The jobless rate may have held at an almost three-year low of 8.5 percent. Another report may show service industries expanded at a faster pace last month.
“The labor market continues to churn out new jobs at a respectable pace,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “We aren’t back to normal yet, but we are on our way.”
In Asia, Reserve Bank of India Deputy Governor Subir Gokarn said the monetary authority will cut interest rates once it’s confident inflation will keep slowing.
“The stance now is that we have reached the peak and any further action will be toward easing,” Gokarn said in an interview. The central bank isn’t concerned about the currency’s record monthly advance in January “because in a sense it’s a correction,” following last year’s 16 percent decline, he said.
To contact the reporter on this story: Patrick Henry in Brussels at phenry8@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
