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Disappointing Eurozone retail sales and services data hit recovery hopes

EUROZONE retail sales fell again in January after briefly rising month-on-month in December, underlining the continued fragility of household demand as unemployment grows and boding ill for the economy.

Retail sales in the 16-country currency area dropped 0.3 per cent against December and dipped 1.3 per cent year-on-year, the European Union statistics office, Eurostat, said yesterday.

Economists polled by Reuters had on average expected a 0.4 percent month-on-month fall and a 1.6 per cent annual decline.

In the eurozone’s two biggest economies – Germany and France – retail sales stayed unchanged month-on-month.

Meanwhile, data also published yesterday showed the eurozone’s services sector expanded more slowly in February than previously expected as the divergence among the big four economies in the 16-member euro area persisted.

The data showed a further disparity in growth rates with Spain’s services sector contracting at a faster pace last month while services in Germany, France and Italy continued to expand. Markit said its final Eurozone Services Purchasing Managers’ Index of around 2,000 companies, ranging from banks to hotels, fell to 51.8 in February from 52.5 in January, revised down from a flash estimate released two weeks ago of 52.0.

The data came ahead of today’s European Central Bank meeting amid wide expectations it will leave its main refinancing rate at a record low of one per cent.