By Scott Kanowsky
Investing.com -- Eurozone retail sales dropped sharply and by more than expected in October, according to new data on Monday from the European Commission's statistics arm, in a sign that Europeans may be reeling in spending as living costs rise.
Retail sales in the currency area fell by 1.8% during the month, down from a gain of 0.8% in September. Economists had predicted the figure would decline by 1.7%.
On an annualized basis, October retail sales dipped by 2.7%, just below estimates of a slide of 2.6%.
The volume of retail trade decreased by 2.1% month-on-month for non-food products and by 1.5% for items like food, drinks, and tobacco, Eurostat added. However, this was offset by a slight 0.3% uptick in demand for automotive fuels.
Germany and France - Europe's two largest economies - both posted falls in retail sales of almost 3%. Spain was an exception among the bigger European nations, reporting an increase of 0.4%.
Analysts at ING argued that demand for retail goods is slowing as more Europeans feel the squeeze from soaring inflation on their purchasing power. The consumer price index for the Eurozone hit a record 10.6% in October but has since retreated to 10% in the year to November, sparking hopes that the inflation surge may be starting to abate.
"The retail environment remains very tricky for the months ahead. We don’t expect an immediate recovery as real wages remain deep in negative territory," the ING analysts said in a note, adding that there is uncertainty that holiday season demand this year will be strong enough to ease pressure on high inventory levels.