Euro zone retail sales were stronger than expected in April, rebounding from a March slump despite rising inflation and a European Central Bank interest rate rise, data showed today.

The European Union's statistics office Eurostat said retail sales in the 17 countries using the euro, an indication of household demand, rose 0.9 per cent month-on-month in April for a 1.1 per cent year-on-year gain.

"April's rebound in euro zone retail sales raises hopes that consumer spending will help support the region's economic recovery," said Martin van Vliet, economist at ING bank.

Economists noted however that fiscal tightening across the euro zone and rising commodity prices were likely to keep
household spending in check.

"These ... two headwinds will continue to act as a restraint on consumer spending in the remainder of this year. That said, with consumer spending in many 'core' countries showing signs of recovery, the ECB remains on course to cautiously tighten monetary policy," Mr van Vliet added.

Sales increased despite inflation rising to 2.8 per cent year-on-year in April, above the European Central Bank's target of below but close to 2 per cent, on rising food and energy prices that cut into disposable income.

The ECB raised its main interest rate by 25 basis points to 1.25 per cent in April to stem inflationary pressures and
economists expect it will further increase borrowing costs in July.

Reuters