UPDATE 1-Euro zone retail sales slow sharply in July, add to growth worries

Wed Sep 3, 2014 5:41am EDT

(Adds economist comment)

BRUSSELS, Sept 3 (Reuters) - Euro zone retail sales slowed as expected in July, data showed on Wednesday, adding to worries about euro zone economic growth, which ground to a halt in the second quarter.

The European Union's Statistics Office, Eurostat, said that the volume of retail sales in the 18 countries sharing the euro fell 0.4 percent month-on-month in July and rose 0.8 percent year-on-year. Economists polled by Reuters had forecast a 0.4 percent monthly fall and a 0.9 percent annual rise.

Eurostat also lowered its estimate for retail sales growth in June to 0.3 percent month-on-month from the 0.4 percent reported previously and to 1.9 percent year-on-year from 2.4 percent previously.

"July's 0.4 percent drop in euro zone retail sales volumes fuels concern that recently weakening consumer confidence across the euro zone is starting to lead to increased caution in spending, thereby harming growth prospects," said Howard Archer, an economist at IHS Global Insight.

The decline in July was mainly caused by falling sales of food, drinks and tobacco. Sales slowed even though inflation had reached just 0.4 percent year-on-year in July and slowed to 0.3 percent in August.

The European Central Bank wants to keep price growth below but close to 2 percent and is trying to keep inflation expectations from falling too low, to ward off deflation.

The ECB meets on monetary policy on Thursday. Executive board member Benoit Coeure said in an essay published in Greek newspaper Ta Nea on Saturday that the bank was ready to adjust policy further if needed. (Reporting By Jan Strupczewski; Editing by Larry King)