Euro zone retail sales were weaker than expected in December despite a month-on-month sales jump in Germany, data showed today.
The European Union's statistics office said retail sales in the-then 12 countries using the euro rose 0.3 per cent month-on- month in December for a 2.1 per cent year-on-year gain.
This fell short of market expectations of a 1.1 per cent monthly increase and a 2.3 per cent annual rise.
The strength of consumer demand is key to how quickly consumer prices rise in the euro zone and to the pace of interest rate rises by the European Central Bank.
Markets expect the ECB to raise rates in March by 25 basis points to 3.75 per cent to stem inflationary pressures from the relatively fast growing euro zone economy and credit growth.
But economists are spilt over what the ECB will do next.
Euro zone retailers had mixed fortunes during crucial Christmas trading with some German stores seeing a consumer rush ahead of a value added tax rise, while sluggish consumption hit sales in France and Italy.
The biggest monthly increase in retail sales was in Germany, where retail sales jumped 2.4 per cent as consumers brought forward purchases ahead of the 2007 value added tax rise.
Germany raised the VAT rate by 3 percentage points to 19 per cent from January 1st.