Nov. 5 (Bloomberg) -- European retail sales fell for a 16th month in September, declining more than economists estimated as consumers curbed spending amid rising unemployment.

Store revenue in the 16-nation euro region dropped 3.6 percent from a year earlier after falling a revised 2.3 percent in August, the European Union’s statistics office in Luxembourg said today. Economists had predicted a drop of 2.4 percent, according to the median of 14 forecasts in a Bloomberg survey. From the prior month, September sales fell 0.7 percent, the biggest drop since October 2008.

“In Europe, you shouldn’t bet on consumption to help the recovery of the economy,” said Martin van Vliet, an economist at ING Groep NV in Amsterdam. “Although European unemployment hasn’t increased much compared to the U.S., the fear of what’s ahead is hurting retail sales.”

Households may continue to hold back on shopping even as the euro region emerges from the worst recession since World War II. Companies across Europe are still eliminating jobs and lowering prices to deal with falling demand. Metro AG, Germany’s largest retailer, this week reported a 61 percent plunge in quarterly profit and said it sees no improvement in conditions for the rest of the year.

Euro-area unemployment rose to 9.7 percent in September, the highest in more than a decade. The European Commission forecast two days ago that the jobless rate will reach 10.9 percent in 2011, which would be the most since at least 1995.

Savings Rate

Consumers in Europe have boosted their savings while curtailing investment to weather the recession. The household savings rate in the euro area increased to 16.5 percent in the second quarter from 16 percent in the previous three months, the statistics office said in a report last week. That was the highest rate since the data were first collated in 1999.

Dusseldorf-based Metro said on Nov. 3 that retail sales in Germany, the source of about 40 percent of the company’s revenue, fell for a second month in September after companies shortened working hours, leaving consumers with less to spend. Unemployment in Germany, Europe’s largest economy, held steady at 7.6 percent in September.

European Central Bank President Jean-Claude Trichet said last month that the economy will strengthen “at a gradual pace.” The Frankfurt-based ECB probably will keep its key interest rate at 1 percent at its meeting today, according to the median estimate in a Bloomberg survey of economists.

While retail sales continue to contract, evidence is mounting that the economy is pulling out of the slump. Europe’s services and manufacturing industries expanded for a third month in October, a composite index published by London-based Markit Economics showed. The European Commission on Nov. 3 raised its 2010 forecast to show 0.7 percent growth compared with an earlier estimated contraction of 0.1 percent.

Hawesko Holding AG, Germany’s biggest wine seller, said on Nov. 2 that third-quarter profit rose almost fourfold as sales increased 7 percent. Tourism operator TUI AG today said its German division saw increased orders for the winter season.

To contact the reporter on this story: Jurjen van de Pol in Amsterdam at jvandepol@bloomberg.net

Last Updated: November 5, 2009 05:00 EST