Consumers across Europe are shying away from shops, with March data revealing a sharp drop in retail sales in the eurozone’s biggest and most powerful economy, Germany.

Retail trade across the 17-nation eurozone fell by one per cent in March compared to February, when it had risen slightly against January – with a dramatic decline in pre-bailout Portugal also emerging from new data released by the EU yesterday.

But it was the monthly slide of 2.1 per cent for purchases by consumers in Germany that sounded alarm bells given the upward march of inflation recently and the prospect of another eurozone interest rate rise over the summer, if not today.

“German consumers get particularly worried about inflation so there is still the very real possibility that they will be very careful in their spending for now at least,” warned London-based IHS Global Insight analyst Howard Archer, albeit he maintained that Germany “still seems well placed for a significant pickup in consumer spending in 2011.”

According to the same Eurostat agency, eurozone inflation rose again in April to a level well above the fundamental European Central Bank target of just below two per cent, hitting 2.8 per cent.

“If the eurozone is to see sustained, decent growth in 2011, it needs consumers to increasingly step up to the plate,” Mr Archer underlined.

The biggest monthly drop was in Portugal, down 4.7 per cent. This came in the tense run-up to Lisbon’s formal request of a state bailout to eurozone partners, with households anticipating deep cuts in public spending and tax rises.