Business life: My finance news blog

European retail sales dropped 1.6 percent in March from a year earlier, the most since at least 1995 and twice as much as economists forecast, as soaring fuel and food costs sapped consumer spending.

Retail sales in the euro area declined 0.4 percent on the month, the European Union's statistics office in Luxembourg said today. Economists had forecast a 0.7 percent annual decline, according to the median of 20 estimates in a Bloomberg News survey.

The European Central Bank governing council, which meets tomorrow to set interest rates, has refused to follow its counterparts in the U.S. and the U.K. in cutting interest rates, arguing that domestic demand will help sustain economic growth. Now, the surge in food and crude-oil prices, which has focused policy makers' attention on inflation, is also undermining consumer sentiment.

“This is pretty grim,'' said Ken Wattret, senior economist at BNP Paribas in London. “The big picture has been very weak for some time and up until this point the ECB has been in denial. They keep on cheerleading the improvement in consumption, but it simply hasn't happened.''

The euro extended losses following the report, falling as much as 0.5 percent to $1.5451 internet payday loans fast cash now. It traded at $1.5467 at 11:42 a.m. Brussels time.

`Many Challenges'

Retailers have “never before faced so many challenges,'' Jose Luis Duran, chairman of Carrefour SA, the world's second- biggest retailer, said April 9. “Inflation is a big issue.''

The increase in costs is outstripping the gain in prices charged by retailers, he said.

Ikea, the largest home-furnishings seller, is cutting back expansion plans as economic growth slows and prices increase, Chief Executive Officer Anders Dahlvig said the same day.

Even unemployment at a record low has failed to spur spending. Confidence among households in France dropped to a record low last month, while a European Commission index of sentiment in the euro area also fell in April.

Retail sales in France declined 0.8 percent in March from the year-earlier month, while sales in Germany, Europe's biggest economy, dropped 1.1 percent, today's report showed.

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