July 4, 2012 / 9:15 AM / 7 years ago

Euro zone sales regain ground in May, trend still weak

BRUSSELS (Reuters) - Shoppers in the euro zone spent a little more freely in May, but not enough to make up for big falls in retail trade the month before and sales were down sharply on a yearly basis as households struggle through the bloc’s debt crisis.

Sales at shops in the 17 countries sharing the euro rose 0.6 percent in May after falling 1.4 percent in April, the European Union’s statistics office Eurostat said on Wednesday.

That was better than the 0.3 percent rise forecast by economists in a Reuters poll, but still at levels not seen since the 2009 global financial crisis.

The performance was worse than expectations on an annual basis and retail trade fell 1.7 percent in May compared to the same month last year. Economists had forecast a 0.8 percent fall.

“Europe’s debt crisis is likely to have a lasting impact on consumption,” said Olivier Bizimana at Morgan Stanley in a note to clients. “Consumers are facing falling net worth and lingering economic uncertainty. The sovereign debt crisis has dented households’ financial wealth in core Europe,” he said.

Sales in Germany, Europe’s biggest and most resilient economy, fell for the second straight month in May and the 1.2 percent increase in France was not enough to compensate for a fall of nearly double that size in April. Spain painted a similar picture.

While retail trade in Belgium rose 0.2 percent in May, volumes have not posted gains since a modest rise last December, and in separately released data this week, new car registrations fell in June on an annual basis.

Euro zone joblessness rose to a record 11.1 percent in May, leaving 17.56 million people out of work as companies cut staff to deal with weak demand and governments look to reduce their bureaucracies and bring down their budget deficits that ballooned in the early, boom years of the euro.

In just one example of the worsening economic outlook, Air France-KLM (AIRF.PA), Europe’s largest carrier, said last month it would cut more than 5,000 jobs to deal with limited growth prospects, rising costs and the euro zone crisis.

A majority of economists expect the ECB to cut rates on Thursday, in theory making it cheaper for the euro zone’s hard-pressed households and firms to borrow, in an attempt to help revive the economy, but its impact will likely be limited.

Reporting by Robin Emmott; editing by Rex Merrifield

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