Eurozone retail sales fell more than expected year-on-year in January and labour costs eased at the end of 2008, data showed on Friday, pointing to a deep recession that may trigger more interest rate cuts. Retail sales in the 16-nation euro area inched up 0.1 percent month-on-month but fell 2.2 percent annually, European Union statistics office Eurostat said.
Economists polled by Reuters had expected a 0.2 percent monthly increase and a 2.1 percent decline year-on-year. Eurostat also reported eurozone labour costs slowed in annual terms in the fourth quarter of last year as wages moderated, pointing to falling consumer demand.
"The consumer backdrop is pretty awful, we have got unemployment rising, the financial sector in trouble, stock markets collapsing, concerns about the housing market, it couldnt be worse really," said Ken Wattret from PNB Paribas.
Eurostat revised down its retail trade figures for December - when they are traditionally boosted by Christmas - to minus 0.3 percent month-on-month and minus 2.4 percent year-on-year from previous readings of 0.0 and -1.6 percent respectively. Retail sales are an indication of household demand. Falling private consumption was one of the reasons for a shrinkage in the eurozone economy in the third and fourth quarters of 2008.
The data boosted expectations of a further interest rate cut from the European Central Bank, which has lowered its main rate by 275 basis points to 1.5 percent over the last few months.
Eurostat said food, drink and tobacco sales fell 0.3 percent month-on-month in January, while sales of non-food products increased 0.4 percent. Eurostat said eurozone hourly labour costs rose 3.8 percent year-on-year in the fourth quarter, down from an upwardly revised 4.2 percent in the prior three months. The wages and salaries component of the hourly costs rose 3.9 percent year-on-year against 4.2 percent the quarter before. The fourth quarter is a period when many people receive their bonuses.
The data showed moderated wage growth in the European Unions biggest economies, such as Germany and France. But the figures skyrocketed in some new EU member states outside the eurozone - especially the Baltic republics, Bulgaria and Romania. In Latvia, which was forced to seek help from the International Monetary Fund and the EU to support its balance of payments, labour costs increased by 20.6 percent.