European retail sales drop as recovery falters

European retail sales drop as recovery falters
People queue to enter a government unemployment office in Madrid, Spain.
LONDON (AP) — Further signs emerged Wednesday to show that the paltry economic recovery in the 17-country eurozone is losing steam.

Despite evidence that growth was weak even in the last quarter of the year, few economists think it will prompt the European Central Bank to provide stimulus at Thursday's policy meeting. Last month, the ECB cut its benchmark interest rate to a record low of 0.25 percent.

Figures from Eurostat, the EU's statistics office, showed retail sales across the region fell a monthly 0.2 percent in October. That followed a 0.6 percent decline in September and confounded expectations in the markets for a modest increase.

Meanwhile, financial information company Markit confirmed its purchasing managers' index — a gauge of business activity — fell in November. Though the index was revised up from the initial estimate of 51.5 to 51.7, it was down on October's 51.9.

Chris Williamson, Markit's chief economist, said the decline confirms that the recovery "lost some momentum" in November.

For an economy that grew by a quarterly rate of 0.1 percent in the third quarter, that's hardly encouraging.

"While we shouldn't lose sight of the fact that the region is growing again, in marked contrast to the decline seen earlier in the year, it's clearly a concern that the rate of growth remains so fragile," said Williamson.

What is particularly worrisome is the fact that the Markit data show that the eurozone's second and third largest economies, France and Italy, may be contracting further.

"Declines in the PMIs for Italy and France raise the prospect of these countries' economies contracting again in the fourth quarter, meaning Italy's recession will have extended into a staggering tenth successive quarter and France will have slid back into a new recession," said Williamson.

Luckily for the eurozone as a whole, its powerhouse economy, Germany, is growing strongly — its PMI reading of 55.4 was a 29-month high. Spain was the other bright spot as the eurozone's fourth-largest economy continues to exhibit signs of life in the face of its debt problems and a sky-high unemployment rate of around 26 percent.

The economic backdrop is likely to feature heavily when Mario Draghi, the ECB's president, holds his monthly press conference following Thursday's meeting of the governing council. Though the central bank is expected to maintain a dovish tone, most economists think it will keep its policy unchanged at least until early next year. Further measures that it may consider include making banks pay to keep funds on deposit at the central bank in the hope that it may encourage them to lend.