Eurozone retail sales below expectations

Retail sales in the eurozone unexpectedly fell in May from April and grew little in annual terms, Eurostat said, pointing to continued fragility in consumer demand despite optimism about an economic recovery.
The European Union's statistics office said on Wednesday that retail sales in the 12 countries using the euro increased 0.8 percent from May 2005 but fell 0.6 percent month-on-month, mainly dragged down by declines in Germany.
Eurostat also revised downward the April figures to growth of 2.4 percent year-on-year and 1.0 percent in monthly terms from prior readings of 2.8 percent and 1.4 percent respectively.
"It's obviously disappointing, along with the revisions, suggesting by and large that it is still something hardly firing on all cylinders," said Steve Barrow, chief currency strategist at Bear Stearns Bank. Economists polled by Reuters had expected May sales to rise 0.1 percent on the month and 1.8 percent from a year earlier.
Consumer demand has long been considered one of the weak points of the eurozone economy as shoppers worry about job security and the region's still relatively sluggish growth.
The sales figures, which followed a string of upbeat economic data for the eurozone, may indicate that its recovery is still mostly business- or export-driven.
The figures were overshadowed by the RBS/NTC Eurozone Services report, which showed growth in the eurozone services economy hit a six-year high in June and may be nearing a peak amid inflation pressures. The data came a day before the European Central Bank meets, with analysts expecting no immediate change in interest rates.
But ECB President Jean-Claude Trichet is expected to signal whether the bank plans to accelerate its monetary tightening in early August by raising rates from the current 2.75 percent.
Eurostat said a 2.0 percent year-on-year increase in sales of non-food products helped push up the overall figure for May. Trade in food, drinks and tobacco fell by 0.6 percent.
In monthly terms, food, drinks and tobacco fell 0.8 percent and non-food products by 0.4 percent. In Germany, the eurozone's biggest economy, retail sales decreased by 2.2 percent in May from the previous month for an annual fall of 2.0 percent.
In France, where consumers have been traditionally more willing to open their wallets, sales grew by 1.4 percent year-on-year and 0.1 percent month-on-month.
In the full EU of 25 countries, retail sales fell 0.1 percent month-on-month, but rose 2.2 percent compared with May last year, propped up by strong figures in Britain and Sweden.