Page last updated at 11:15 GMT, Wednesday, 3 December 2008

Eurozone retail sales slump 2.1%

Italian shoppers
Shoppers look at a pre-Christmas sale at a leather goods shop in Milan

Retail sales across the 15 nations that share the euro fell more than expected in October, increasing the likelihood of a cut in interest rates this week.

Sales across the eurozone declined 0.8% on a month-by-month basis in October, and by 2.1% from a year earlier, more severe than analysts had expected.

A separate business activity survey said output levels had worsened.

The European Central Bank (ECB) is widely expected to cut rates from the current 3.25% level on Thursday.

Last month it reduced rates by half a percentage point, and ECB president Jean-Claude Trichet said further cuts could not be ruled out as Europe aims to limit the economic downturn.

'Renewed deterioration'

Figures from Eurostat showed inflation in the eurozone fell to 2.1% in November, from 3.2% the month before, furthering the chance of a rate cut.

The eurozone service sector is being hit ever harder by the financial crisis, muted consumer spending and markedly weaker activity in key export markets
IHS Global Insight economist Howard Archer

"Worries about the outlook for the economy and the labour market are probably prompting households to save relatively more," said Nick Kounis, chief European economist at Fortis Bank.

"This leaves High Street activity heading for a renewed deterioration in the fourth quarter following the improvement seen in the third."

Retail sales in September had been flat compared with August, and down 1.4% on an annual basis.

'Horrible survey'

The separate business activity data came from research group Markit.

It has revised its purchasing managers' index down to 38.9 points in November from its first estimate of 39.7.

Any figure less than 50 representing a contraction, and the latest number compares unfavourably with the 43.6 figure in October.

Fortis' parallel service sector activity index also fell further than first estimated in November, down to 42.5 points from the initial 43.2 points figure.

"This is a horrible survey across the board, showing that the eurozone service sector is being hit ever harder by the financial crisis, muted consumer spending and markedly weaker activity in key export markets," said IHS Global Insight economist Howard Archer.

European shares were down in Wednesday trading, with Germany's main Dax index 1.8% lower, and France's Cac falling 1.6%.



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