EUROPEAN retail sales declined for a third month in August after the fastest inflation in 16 years and the prospect of a recession eroded consumer confidence, the Bloomberg purchasing managers' index showed.
While a measure of sales activity in the euro region increased to 47.7 from 46 in July, it's still the third month that the reading held below 50, the dividing line between growth and contraction. The survey of about 1,200 executives compiled for Bloomberg LP by Markit Economics showed retailers cut jobs for a fifth month.
Europe's economy contracted in the second quarter and recent reports suggest it's struggling to resume growth as rising prices erode household spending power.
With inflation at double the European Central Bank's 2-percent ceiling, council member Axel Weber said that the ECB has no scope to encourage a recovery by cutting interest rates.
"Inflation is squeezing disposable incomes, and the outlook for consumer spending and for retailers is gloomy," said Ken Wattret, an economist at BNP Paribas SA in London. "The ECB recognizes the downward risks to growth but it's not giving any indication it will respond."