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    European retail sales continue to fall

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    European retail sales fell for a third month in December as accelerating inflation curbed holiday-season spending, the Bloomberg purchasing managers index revealed.

    A 58 per cent increase in oil prices this year is spurring inflation, sapping purchasing power and prompting concern that central bankers may raise interest rates even as economic growth cools. While unemployment has reached a record low, Europe’s economy is headed for its slowest expansion in three years in 2008, losing momentum as an appreciating euro and housing recession in the United States hamper exporters.

    “The environment is not good” for consumers, said Dominique Barbet, an economist at BNP Paribas SA in Paris. “The positive element is the labour market; the very negative element is the price increases.”

    Inflation in the euro region accelerated last month to the fastest pace since May 2001 as food prices soared, cutting into Christmas shoppers’ budgets.

    “Consumer confidence remained low despite increased marketing efforts by retailers,” NTC said in its analysis. “Worries about a wider economic slowdown and uncertainty in the financial markets heading into the New Year were highlighted.”

    Retailers in Germany, Europe’s largest economy, suffered the biggest decline in sales this month, with the index at 44, up from 43.6. In France, sales dropped for a third month, putting the index at 49.1. A gauge of Italian sales dropped to 44.7 from 45.3.

    “I would be happy to reach last year’s figures, but I don’t think so,” said Tanja Schweer, a manager of a Mueller Ltd and Co. cosmetics store in Datteln, Germany. People “don’t spend money for themselves. They prefer buying cheaper products.”

    French department stores were cushioned by a rebound following a November public-transport strike, said Jacques Perrilliat, director of an association of city-centre retailers, whose members include Le Bon Marche and Printemps chains.

    Even record low unemployment of 7.2 per cent has failed to spur purchases, prompting retailers to expect lower sales next month for the first time since July 2006.