Euro zone July retail sales dip

Euro zone retail sales defied expectations of a rebound and fell in July, pulled down mainly by lower sales of food, drinks and tobacco in a sign consumer demand is yet to benefit from any nascent economic recovery.

Retail sales in the 16-country euro area fell 0.2 percent against June and dropped 1.8 percent year-on-year, the European Union's statistical body, Eurostat, said.

Economists polled by Reuters had expected a 0.1 percent rise versus the previous month and a 2.2 percent fall year-on-year.

Sales of food, drinks and tobacco fell 0.5 percent against June and were 1.8 percent lower than a year earlier.

The euro zone's biggest economy, Germany, which returned to growth in the second quarter, posted a 0.7 percent monthly rise in retail sales.

The data comes just before the European Central Bank is expected to keep its main interest rate at 1.0 percent and present new growth and inflation forecasts amid signs the worst European recession since World War Two may be ending.

Data on second-quarter euro zone gross domestic product showed household demand contributed 0.1 percentage point to the GDP outcome in April-June, which economists attributed to government cash incentives for changing old cars for new ones.

Some said such schemes may have diverted household funds from smaller-ticket items, negatively affecting retail sales, which do not include car purchases.

Economists have raised doubts about the speed and sustainability of any recovery because of high and rising unemployment, which reached 9.5 percent of the workforce in July the highest in more than 10 years.