Eurozone retail sales rose more than expected in annual terms in March, pointing to firm consumer demand, robust economic growth and more interest rate rises from the European Central Bank.
European Union statistics office Eurostat said on Friday that retail sales in the 13 countries using the euro gained 0.5 percent month-on-month for a 2.6 percent year-on-year increase, beating market expectations of a 2.4 percent annual rise.
Retail sales are an indication of consumer demand, which has been on the rise as unemployment falls amid robust economic growth.
"Euro zone retail spending is being underpinned by the stronger jobs market and rising confidence about future economic conditions," said David Brown, chief European economist at Bear Stearns.
"With eurozone unemployment coming down to 7.2 percent, the lowest level since records began, it is no surprise that consumer confidence is in such good shape," he said. "With consumer demand accounting for the lion's share of eurozone GDP, it should be consistent with growth coming through at a robust 2.6 percent this year. This is the sort of trend that will hearten the ECB's case for higher rates ahead."
Markets expect the European Central Bank, which wants to keep annual inflation just below 2 percent, to raise interest rates by 25 basis points to 4.0 percent in June and then perhaps once more later in the year. "What we are seeing right now is in line with the ECB's scenario of a broadening of GDP growth in Europe from export-led to a domestic-demand-led pattern," said Gilles Moec, economist at Bank of America.
Retail sales rose 5.0 percent in annual terms in the eurozone's second-biggest economy, France, and 5.5 percent in Spain. They surged 9.2 percent in Finland. But German sales fell for the third month in a row, down 0.7 percent year-on-year.