Consumer spending in the euro zone's largest economies was weak at the end of 2012, and while easing inflation rates may help, a significant revival that would give a much-needed boost to growth is unlikely soon.
Euro-zone consumers have cut spending in the face of rising unemployment, muted wage increases and higher taxes as governments pursue austerity programs in an effort to cut borrowing.
With little expectation of demand growth, businesses cut investments, leaving the euro-zone economy heavily dependent on exports to stave off an even larger contraction than it has experienced since the final three months of 2011.
Figures released Thursday show weakness in consumer spending continued into the final month of last year, usually one of the busiest because of Christmas, and therefore crucial for retailers.
France's statistics agency Insee said consumer spending was flat in December. Unemployment in the euro zone's second-largest economy hit a 13-year high and the government expects it to rise until the end of the year.
Anxiety about the jobs market has hurt consumer confidence and the data Thursday showed households spent less in December 2012 on clothes, cars, home furnishings and food than in December 2011.
"This shows that people are changing their habits, buying cheaper products and spending more in discount shops," said Dominique Barbet, an economist at BNP Paribas BNP.FR -0.32% . "This provides a good illustration of the consequence of very poor household confidence."
The German economy is in better shape. Figures released Thursday showed the seasonally adjusted unemployment rate fell to 6.8% in January from 6.9% in December. According to surveys, consumer confidence has picked up in recent months.
"Our labor market is in very good shape and is a reliable foundation for a robust domestic economic development," said German Economy Minister Philipp Rösler.
Still, the federal statistics office Destatis Thursday recorded a 1.7% fall in retail sales in December compared with November, a drop that came as a surprise to most economists. In 2012 as a whole, retail sales in the euro zone's largest economy fell 0.3% in real terms, Destatis said.
German retailers don't expect to see a significant recovery this year. The retailers association HDE Thursday said it expects the value of sales to rise by just 1% this year, but with prices also rising that means there will be a slight decline in real terms.
"The start into the new year was subdued," said HDE chief Stefan Genth.
In the euro zone's more troubled economies, the decline in consumer spending has been much greater. Greece's statistics agency Thursday said retail sales in the currency area's weakest economy were 16.9% lower in November than in the same month of 2011.
The figures showed that spending on items such as furniture, electrical and household goods fell by 29.1% from a year earlier, with a 21.2% decline in clothing and footwear, while even spending at supermarkets shrunk by 13.3%.
One drag on euro-zone consumer spending is likely to ease. There are signs that the inflation rate is falling, in line with European Central Bank expectations for 2013. From a recent peak of 2.6% in September, the inflation rate fell to 2.2% in December and appears likely to decline again this month.
In 2012, prices rose faster than household incomes, eroding real spending power. The only way many consumers could have maintained spending would have been to draw on savings, but with an uncertain future, many chose not to do so. In the third quarter of 2012—the most recent for which figures are available—the European Union's statistics agency estimates that real incomes fell 0.3%
Figures released by Spain's National Statistics Institute Thursday showed the annual rate of inflation fell to 2.8% in January from 3.0% in December. Economists forecast that figures to be released in Germany later Thursday will record a decline to 1.9% from 2.1%.
