Retailers feeling pinch

European retail sales declined 1.6 percent in March, the most since at least 1995 and twice as much as economists forecast, as soaring fuel and food costs sapped consumer spending.

The drop in euro-area retail sales from the year-earlier month is the largest since the data series began more than a decade ago, the European Union's statistics office in Luxembourg said yesterday. From the prior month, sales declined 0.4 percent. Economists had forecast a 0.7 percent annual decline and a gain of 0.2 percent from the previous month, according to Bloomberg News surveys.

A doubling of crude-oil prices in the past 12 months and soaring prices for food such as wheat and rice have undermined consumer sentiment across the 15 nations that use the euro. The European Central Bank, which meets today to decide on interest rates, has refused to follow its counterparts in the United States and the United Kingdom in lowering borrowing costs after inflation surged since August, reaching a 16-year high of 3.6 percent in March.

"This is pretty grim," said Ken Wattret, senior economist at BNP Paribas in London. "The big picture has been very weak for some time and up until this point the ECB has been in denial. They keep on cheerleading the improvement in consumption, but it simply hasn't happened."

The euro extended losses following the retail-sales report and traded down 0.7 percent at $1.5430 at 1 pm Brussels time.

Agencies

(China Daily 05/08/2008 page17)