BRUSSELS, Oct 5 (Reuters) - Euro zone retail sales fell less than expected month-on-month in August as a rebound in the food sector lent support, data showed, in a signal consumer demand may be benefitting from a nascent economic recovery.
Retail sales in the 16-country area fell 0.2 percent against July and dropped 2.6 percent year-on-year, European Union statistics office Eurostat said on Monday.
Economists polled by Reuters had expected a 0.5 percent fall versus the previous month, while the annual decrease came in line with their forecasts.
The data comes as the European Central Bank is expected to keep its main interest rate at 1.0 percent this week amid signs the worst European recession since World War Two may be ending.
Analysts expect the euro zone's economy to have started growing in the third quarter of 2009 after it contracted by 0.1 percent quarter-on-quarter in the April-June period.
But expansion is likely to be limited due to growing unemployment, which hit a 10-year high in August at 9.6 percent.
Economists say retail sales figures have been affected by government cash incentives to change old cars for new ones.
Those payouts may have diverted household funds from smaller-ticket items, negatively affecting retail sales, which do not include car purchases.
The car-scrapping programmes are now coming to an end, with Germany having wrapped up its own on Sept. 2.
Eurostat said sales of food, drinks and tobacco increased by 0.5 percent against July after falling for three months in a row. In annual terms, they dropped 1.3 percent.
Non-food products fell 0.6 percent and 3.2 percent respectively.
In Spain, among the hardest-hit by the crisis in the euro zone, monthly sales rebounded by 1.4 percent. In Germany, the euro zone's biggest economy, sales fell 1.5 percent.
In the whole 27-country European Union, retail sales fell 0.3 percent on the month and 1.8 percent year-on-year. (Reporting by Marcin Grajewski; Editing by Dale Hudson)