Retail sales in euro zone exceed expectations

Retail sales in the 16 countries that use the euro rose more than expected in July in a fresh sign that consumer demand is helping drive economic growth, official statistics showed last Friday.

The volume of retail trade rose 0.1% from June, and was 1.1% stronger than in July last year, the European Union's Eurostat statistics agency said. Retail trade in June had risen by 0.2% after Eurostat earlier said it had stagnated during the World Cup month. Economists polled by Dow Jones Newswires had expected the month's retail sales to be flat in July and only 0.7% higher on the year.

A breakdown of the data showed that food, drinks and tobacco sales grew by 0.3% in July from a month earlier, while sales in the non-food sector, which includes items such as clothes and books, decreased by 0.1%.

The data showed a strong regional variation, with Portugal and France registering high levels of consumer spending, while sales in Spain fell by 3% from June.

On Thursday, Eurostat estimated that the euro-zone economy had grown by 1% in the second quarter, mostly driven by strong domestic demand.

The higher level of consumer spending helped allay fears that the European economic recovery was extremely vulnerable to a slowdown in its core export markets in the U.S. and China. However, the European recovery is expected to slow later this year as consumers feel the effects of government budget cuts.