The global credit crunch hold in the European Household Demand

Euro zone retail sales turned out much weaker than expected in October.

The European Union's statistics office said retail sales in the 13 countries using the euro fell 0.7 percent month-on-month and rose 0.2 percent year-on-year. Economists had expected a 0.3 percent monthly decline and a gain of 1.3 percent annually.

Sales fell in all euro zone countries in October. The biggest drop came in the bloc's largest economy, Germany, where they dipped 3.3 percent month-on-month.

Household demand was the main driver of the euro zone economy in the third quarter, helping it grow by 0.7 percent against the previous three months despite a negative contribution from trade.

since August, has hit consumer and business confidence through higher market credit costs and is expected to slow growth next year.

"Evidence of faltering consumer spending heightens the case for the ECB to hold off from raising interest rates further," said Howard Archer, economist at Global Insight.

"Ultimately though, we believe the ECB's next move will be to trim interest rates as slower euro zone growth and the strong euro dilute underlying inflationary pressures," he said.