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European retailers face uncertain outlook

European retailers reliant on discretionary spending such as fashion are facing a tough outlook for the rest of 2007 and in to 2008 according to a report by Moody's.

The report warned that while the outlook for European retailers was stable, the credit market turmoil and knock on effect on consumer spending had heightened the risks to consumption. It said that economic growth in the Euro zone would slow in the second half of 2007 and that overall GDP growth for the year was forecast at 2.5%.

It pointed out that retailers had already reported softer like-for-like sales and said consumer spending in Germany was weak. However spending in the UK and France remains strong.

Moody's said retailers could offset weaker domestic growth with international expansion but warned that overseas markets tended to be more volatile.

Moddy's added that leveraged buyouts were also likely to soften because of difficulties in the credit market.

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