FRANKFURT – A surprise jump in German retail sales and a sharp rise in an index of eurozone economic expectations offered new, tentative, evidence yesterday that European consumers were shaking off the trauma of September 11. The data reinforced the sense that the worst might be over for the European economy after a painful 2001, and that consumers will help fuel a recovery by taking advantage of falling inflation and low interest rates. German retail sales rose 1.6 percent month-on-month, confounding expectations that they would fall for the third consecutive month – one of the rare pieces of positive data Europe’s largest economy has seen in recent months. It was also in line with surveys showing consumer confidence, shattered by the devastating terrorist attacks in New York and Washington, rebounding after a sweeping US victory over the Taleban regime in Afghanistan. «Consumers were more reticent in September and October after the attacks, but in November, there were initial signs that the impact on the German economy wouldn’t be as severe as initially expected,» Ulla Kochwasser, an economist at IBJ Germany, said. Still, retail sales in Germany were down 0.4 percent year-on-year, reinforcing fears that Germany had failed to escape recession in the fourth quarter last year. In contrast, year-on-year retail sales grew strongly in three smaller European economies. They were up 1.7 percent in terms of volume in the Netherlands, 2.6 percent in Sweden in November, and rose 4.1 percent in Greece in October. A further sign of consumer confidence came from western European car registration data which rose 1.2 percent year-on-year in December. And the German economic institute ZEW added to the mood of cautious optimism when its expectations indicator for the German economy showed its third consecutive rise in January. The expectations gauge for Germany rose 10.1 to a positive reading of 35.9, while that for the eurozone rose by 12.8 points to 43.1. The ZEW figures, which reflect the view of surveyed analysts and investors about developments six months ahead, are widely seen as a harbinger of Germany’s closely watched Ifo business climate index which will be published later this month. ECB upbeat again The data was accompanied by optimistic statements about Europe’s economic prospects from the European Central Bank (ECB) and France, the eurozone’s second largest economy. ECB board member Eugenio Domingo Solans reiterated the bank’s recent view that the economy would grow this year and that its current interest rate of 3.25 percent was appropriate. «We believe that monetary policy is adequate for the current level of inflation,» Domingo Solans told Spanish financial radio Intereconomia. «The year 2002 will clearly end with the rate of growth increasing as the year goes on.» Eurozone governments believe the bank has room to cut rates again to add momentum to any recovery later this year, but analysts say the traditionally cautious bank may end its recent easing cycle right here. A draft European Commission report obtained by Reuters on Monday also said there might be scope for the ECB to trim rates again, adding to the 150 basis points of cuts made last year. «These (the latest cuts) have yet to work their way through to the economy and there may be scope for further reductions as inflation continues to decline,» the draft report, which was discussed by the Commission at a meeting yesterday, said. The ECB’s next policy-setting meeting is on February 7. Supporters of a further monetary easing point out that recent industrial output data shows how fragile the eurozone economy is and that a rebound should not be taken for granted. Yesterday, German steel giant ThyssenKrupp AG, the world’s fourth-largest carbon steel maker, lowered its business outlook for this year. «From the present perspective, the group does not anticipate an economic recovery before the second half of 2002,» Chief Executive Ekkehard Schulz told a news conference. French data released yesterday showed industrial output was flat in November, after hefty drops in the preceding two months. Economists said the figures from the second largest eurozone economy were slightly better than expected and confirmed the view that France has replaced Germany, where output fell 1.8 percent in November, as the engine of European growth. The point was driven home by Prime Minister Lionel Jospin, who said France was set to be among the fastest growing industrialized nations this year. «Despite a less favorable economic climate at the end of last year, we will have had growth of at least 2 percent in 2001,» he said in a New Year’s address to journalists. «France should be one of the best placed in the second half of 2002, if initial signs of a turnaround in the economic climate in the United States and Europe are confirmed,» he said.