Fall in eurozone retail sales

Eurozone shoppers are now far more cautious

Retail spending across the 15 nations of the eurozone fell in September, official EU figures have shown.

Hit by slowing consumer spending and the threat of a painful recession, retail sales fell 0.2% from August, and by 1.6% compared to September 2007.

The biggest annual fall came in Spain, where spending has fallen 7.1% in the last twelve months.

The European Central Bank (ECB) is expected to cut interest rates on Thursday to boost consumer spending.

Figures also announced on Wednesday showed that eurozone service sector activity in October fell to a record low.

Negative territory

The fall in retail spending is less than many economists had expected.

The surveys continue to show record pessimism Guillaume Meneut, Merrill Lynch

"There is a slightly less-than-expected fall, but a fall nonetheless. Eurozone growth and retail sales are well into negative territory," said Matthew Sharratt at Bank of America.

He added that the figures should "virtually guarantee" a 0.5% interest rate cut from the ECB.

Spending on food, drinks and tobacco remained unchanged, while spending on non-food products fell by 0.3% from August.

The fall on the previous month across all 27 countries in the EU was 0.1%, and 0.4% from September last year.

Of the 15 eurozone economies, Germany suffered the biggest drop in retail trade from August, falling 2.3%. Compared with September last year, Spain suffered the biggest drop, with trade falling 7.1%.

Belgium experienced the biggest growth in retail sales, with a 1.4% increase over August and a 4.2% increase over September 2007.

Service sector

Meanwhile, the Markit Eurozone Purchasing Managers' Index for the services sector has revealed that activity in the sector in October fell to its lowest level since the index was introduced 10 years ago.

The index slumped to 45.8, below both economists' forecasts and September's score of 48.4. Any score below 50 represents a contraction in the services sector.

On Monday, Markit announced that the purchasing index for the manufacturing sector fell to 41.1, also a record low.

"The surveys continue to show record pessimism," said Guillaume Meneut at Merrill Lynch.

The European Commission announced on Tuesday that the eurozone economy contracted by 0.2% in the second quarter, and that the EU economy would "grind to a standstill" in 2009.