Rise in retail trade shows consumers are still optimistic

Retail sales rose 10.6 percent in March, data from the National Statistics Service yesterday showed, underlining the continued resilience and optimism of Greek consumer sentiments. The faster pace compared with a 7.9 percent increase in February. Retail sales grew by an average of 9.1 percent in the first quarter of the year. «The robust figures are in line with recent consumption spending trends,» said Platon Monokroussos, economist at EFG Eurobank. The economy grew 4.3 percent in the first quarter, as Greece outpaced all other EU countries, underpinned by strong investment and consumption spending. The eurozone, in contrast, remained stagnant in the first quarter as businesses cut down on their investments and as consumers held back spending on unemployment fears. The European Central Bank on Thursday scaled back its forecast and predicted sluggish growth for the eurozone this year, with a moderate recovery seen in 2004. Robust consumption and investment spending should be able to drive the Greek economy forward this year, with growth exceeding 3.5 percent, said Monokroussos. The government is targeting a more ambitious 3.8 percent economic expansion this year. Monokroussos said the March retail sales underscored the strength of Greek consumer sentiments, especially at a time when uncertainties over a war in Iraq were weighing on business and consumer confidence. Low interest rates and robust credit expansion are helping to sustain the consumption boom, he said. Domestic banks are expected to further lower borrowing costs in the wake of a 50 basis point cut in the European Central Bank’s refinancing rate on Thursday, providing yet another boost to both household and corporate spending. Monokroussos, however, warned of a slight slowdown in consumption expenditure in the coming months. «Worsening uncertainties over the economy, concerns whether the stock market can keep up its recent rally, and recent figures on car sales point to slower albeit strong growth,» he said. He said Greece’s above-average inflation could also hamper consumption spending.

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