Euro zone retail sales down in May

There was more bad news for the struggling euro zone today with the news of a fall in retail sales in May.

According to Eurostat, retail sales in the euro zone fell 0.4% month-on-month - analysts had expected a fall of 0.1%.

Meanwhile, on an annual basis, the fall was 3.3% - again worse than the 2.7% fall analysts had expected.

The latest data from Eurostat indicates that the 16-nations that share the European single currency rose continue to tighten their belts.

Commenting on today’s figures, Colin Ellis, economist at Daiwa Securities, said: “There was further confirmation today, if any were needed, that domestic demand is not set to ride to the rescue of the euro area economy any time soon.”

There was further evidence yesterday that the euro zone economy continues to struggle after Eurostat revealed that the unemployment rate rose from 9.3% in April to 9.5% in May - the highest rate since 1999.

Economists had forecast a rise to 9.4%.

Furthermore, it was announced earlier this week that the area could be for a period of deflation.

A short period of deflation (where prices fall rather than increase) could be a serious threat to the economy because it deters consumers and businesses from spending in expectation of falling prices.

Eurostat said inflation in the euro zone turned negative in June for the first time since the single currency was introduced over a decade ago. Prices fell 0.1% over the last 12 months - the inflation rate had been 0% in May.

The ECB‘s target rate for inflation is just under 2%.

Finally, yesterday the European Central Bank (ECB) elected to keep interest rates at 1% as widely expected.

In an effort to boost the struggling economy, the ECB has cut rates seven times since October when rates stood at 4.25%.

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