Aug 05, 2013 05:07 PM EDT

Euro Zone Retail Sales Back in Decline in June, France a Bright Spot

Retail sales in the euro zone fell broadly for the first time in three months in June, data showed, highlighting the drag of depressed household spending on the bloc's fragile recovery.

The European Central Bank is hoping for a gradual improvement later this year in the health of the 17-member single currency area, which is likely to be driven mainly by exports and low interest rates.

France bucked the trend by registering an increase in retail trade, but for the bloc as a whole volumes fell 0.5 percent on the month, in line with expectations. That followed a revised 1.1 percent rise in May, the EU's statistics office Eurostat said on Monday.

The euro zone is in its longest recession since the creation of the euro in 1999, which has led to record high jobless rates and left households with less cash to spend.

Retail sales dropped by 0.9 percent on the year, against expectations of a 1.2 percent decline by economists polled by Reuters, following a revised 0.3 percent increase in May.

"The negative retail sales growth figure in June is probably just a correction after the strong increase in May and not the start of a renewed downward trend," said Peter Vanden Houte, chief euro zone economist at ING.

Shoppers in the euro zone spent more on automotive fuel in June, but it was not enough to offset a 0.6 percent drop in spending on food, drink and tobacco and a 0.2 percent decrease in purchases of other items such as electronics, clothing and internet goods.

Retail sales in the bloc's largest economy Germany fell 1.5 percent, the biggest monthly drop since December last year.

France, the second largest, registered a 0.6 percent increase. Consumer spending data last week from French statistics office Insee, which unlike Eurostat includes energy costs, showed a fall of 0.8 percent.

The euro zone as a whole registered a modest rise over the second quarter which Howard Archer, IHS European economist, said could indicate an improving consumer mood.

In June, unemployment rates fell for the first time in more than two years, adding to signs the bloc may make a muted economic recovery later this year.

To aid that process, the ECB cut its main interest rate to a record low of 0.50 percent in May and has said it will keep rates low for an extended period, in part to boost weak consumer spending.

"All in all, most figures published recently continue to confirm the expectation of a subdued and fragile recovery in the second half of 2013," said Vanden Houte.

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