Spain retail sales fall sharply in October

 

Retail sales in Spain retail sales fell sharply in October as demand was hit by a rise in value-added tax that tore into already weak consumer sentiment.

It pointed to a continued sharp economic contraction during Q4.

Official data showed retail sales fell by 9.7% year-on-year on a calendar-adjusted basis in October after a revised fall of 11.0% in September. The consensus forecast for October was for a fall of 11.5%.

Last month was the steepest drop on record. September data was revised down marginally from a fall of 10.9%, which was the biggest fall on record.

Spain fell back into recession in the last quarter of 2011, and the economy is not expected to grow again until late in 2013. Weak growth prospects have kept the country at the forefront of the euro zone crisis as it battles to rein in its public deficit despite falling revenues as a recession deepens.

The Bank of Spain on Wednesday said it expected the VAT hike to have a negative effect on economic activity in Q4 of 2012 following better than expected numbers in Q3.

The rate of IVA increased to 21%, up three percentage points, at the end of summer.

"The information available points to a continued fall in output in the final months of 2012, when there will be a reverse in the effect of the anticipated spending that was brought about by the IVA hike in September," the central bank said in its monthly report.

The data from the National Statistics Institute (INE) for October marked the 28th month in a row of falling retail sales data.

"Plummeting retail sales in both September and October suggest the economy will pay a heavy price in the next few quarters, with consumer spending indicators exhibiting depression-like characteristics," said Raj Badiani, analyst at IHS Global Insight.