LONDON (AP) — Disappointing retail sales figures are
likely to reinforce concerns at the European Central Bank that the
eurozone economic recovery is failing to gain momentum at a time when
inflation is stubbornly low.
A day ahead of the ECB’s monthly
policy meeting, official figures showed that the retail sales across the
18-country eurozone suffered their biggest drop in over two and a half
years in the crucial shopping month of December.
Eurostat, the
EU’s statistics agency, said Wednesday that retail sales across the bloc
fell by 1.6 percent in December, more than offsetting the previous
month’s 0.9 percent rise.
That was way worse than the 0.5 percent
fall anticipated in the markets and represented the biggest monthly
decline since May 2011. The drop, which means retail sales in the
eurozone ended the year 0.9 percent lower than where they started, was
broad-based, with the region’s top-two economies faring particularly
badly. Germany saw a sharp 2.5 percent monthly decline while France
posted a 1 percent drop.
Retail sales are a major component of
economic output across the region and the December figures may raise
concerns that the eurozone recovery did not accelerate in the fourth
quarter as many had anticipated.
On Feb. 14, Eurostat will publish
its first estimate for economic growth in the eurozone in the final
three months of the year. Most economists expect a modest improvement on
the previous quarter’s paltry 0.1 percent quarterly growth, but with
retail sales down 0.7 percent during the October to December period,
those forecasts may now be in doubt.
The figures will likely
ratchet up the pressure on ECB officials to ease monetary policy further
at their monthly meeting on Thursday in order to shore up the recovery.
Analysts say the most likely outcome is a reduction in the benchmark
interest rate to a record low of 0.10 percent from the current 0.25
percent.
A broad range of economic indicators have shown that the recovery in the eurozone is failing to gain
traction.
A
survey Wednesday from financial information company Markit reinforced
that view. Though its purchasing managers’ index — a broad gauge of
business activity — rose to its highest reading since June 2011, it was
lower than anticipated.
Markit said its composite PMI, which
incorporates the manufacturing and services sectors, was 52.9 in
January, up from December’s 52.1 percent but down on a preliminary
estimate of 53.2 issued last month. Still, at just above the 50 mark
that separates growth from contraction, the figure suggested a mild rise
in activity.
As well as fretting about growth, the ECB has
another headache — the possibility of a debilitating bout of
Japanese-style deflation. At an annual rate of 0.7 percent, consumer
prices are rising at a far slower pace than the ECB’s target of just
below 2 percent.
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