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Eurozone retail sales up 0.5 percent in October

By Pan Pylas

Associated Press

Published: Friday, Dec. 3 2010 4:12 a.m. MST

LONDON — Retail sales in the 16 countries that use the euro rose by 0.5 percent in October, more than expected, despite weakness in some of the most indebted countries, official figures showed Friday.

The monthly increase reported by Eurostat, the EU's statistics office, was more than double market forecasts for a 0.2 percent increase, and was due largely to buoyant sales in Germany, Europe's biggest economy.

October's rise was the biggest monthly increase since May and followed two consecutive monthly 0.1 percent declines. It took the year-on-year gain up to 1.8 percent from September's 1.5 percent.

So far, the bulk of the eurozone's stronger than anticipated recovery from recession has been based on booming exports, particularly out of Germany.

For the recovery to become more self-sustaining, analysts think consumers have to increase their spending at a time when many governments in the single currency area are imposing tough austerity measures in an attempt to get a handle on their massive debts.

The headline figure masks big differences within the eurozone — sales have continued to drop in Greece, Spain and Portugal, three of the most highly indebted countries where governments are focusing on spending cuts.

A similar picture emerged in a survey of the eurozone's services sector from Markit, a financial information company.

Though the monthly purchasing managers' index — a gauge of business activity — for the services sector rose to a three-month high off 55.4 in November from October's 53.3, the increase was largely due to Germany. November's reading was revised up from the initial estimate of 55.2.

Any reading above 50 indicates expansion.

"Germany's recovery goes from strength to strength as service providers and consumers feel the benefit from export-led growth but austerity measures and economic uncertainty are hitting consumer confidence in the debt-laden countries," said Chris Williamson, chief economist at Markit.

For the 27-country EU, which includes non-euro countries such as Britain and Sweden, retail sales rose a monthly 0.4 percent for an annual gain of 1.8 percent.

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