Europe Retail Sales Unexpectedly Fall as Energy Costs Soar

European retail sales unexpectedly declined in February as surging energy costs prompted consumers to cut back spending.

Sales in the 17-nation euro region slipped 0.1 percent from January, when they advanced 0.2 percent, the European Union’s statistics office in Luxembourg, Eurostat, said today. Economists forecast a 0.1 percent gain, the median of 18 estimates in a Bloomberg News survey showed. Sales rose 0.1 percent on the year.

European households may keep spending plans on hold as rising energy prices erode their purchasing power amid government budget cuts. Consumer confidence weakened in March and inflation quickened to the fastest in more than two years. The European Central Bank has signaled it is ready to raise borrowing costs on April 7 to fight price pressures.

“Higher energy prices and fiscal austerity measures are restraining consumers’ ability to buy,” said Martin van Vliet, an economist at ING Group in Amsterdam. “The current weakness in high street spending would have been worse if not for the improving labor market in ‘core’ euro-zone countries, Germany in particular, which is acting as an important support for overall euro-zone consumer spending.”

The euro was lower against the dollar following today’s data and traded at $1.4182, down 0.3 percent, at 11:22 a.m. in Brussels.

Germany’s Economy

In Germany, Europe’s largest economy, companies are increasing spending and hiring to meet export orders from emerging nations such as China. German unemployment fell twice as much as economists forecast in March.

Across Europe, growth in the services and manufacturing industries accelerated more than initially estimated in March, led by Germany and France, data showed today. Service-sector business activity “accelerated to the strongest since August 2007, suggesting a further broadening out of the recovery beyond the goods-producing sector,” London-based Markit Economics said.

German retail sales dropped 0.3 percent in February from January, when they rose 0.4 percent, today’s Eurostat report showed. Spanish sales fell for a fourth month, declining 0.3 percent, while Irish consumers cut spending by 0.6 percent in February. In France, sales dropped 1.1 percent.

European retailers have relied on faster-growing economies to boost sales as rising unemployment and austerity measures eroded consumer demand at home. L’Oreal SA (OR), the world’s largest cosmetics maker, said on March 18 it aims to double sales in Brazil by 2015. Francesco Trapani, chief executive officer at Italian jeweller Bulgari SpA (BUL), said last month he’s “cautiously optimistic” after January and February sales rose 25 percent.

In the 27-nation EU, retail sales fell 0.1 percent in February from the previous month, today’s report showed.

To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.