July 5 - Retail sales in the euro zone slipped in May from April with a sharp fall in economic powerhouse Germany, data showed on Tuesday, as the single currency area prepared for a likely interest rate rise.

Month-on-month sales of food, drink and tobacco were down by 0.6 percent in the euro area in May. - photo: corbis

The European Union's statistics office Eurostat said month-on-month volumes of retail sales fell by 1.1 percent in the 17 countries using the euro in May, with Germany reporting a fall of 2.8 percent and Portugal dropping 3.1 percent.

The month-on-month fall, which was broadly in line with the 1.0 percent dip economists polled by Reuters had expected, was blamed largely on a decline of 0.9 percent in the non-food sector, such as sales of electrical goods and clothing.

The May figure represents a fall of 1.9 percent from the same month last year, sharply lower than the Reuters consensus forecast of a 0.5 percent year-on-year fall.

Month-on-month sales of food, drink and tobacco were down by 0.6 percent in the euro area in May.

Earlier this week, euro zone producer prices slipped more than expected as energy costs eased, leading some economists to predict that the European Central Bank may hold off on any further interest rate rises in the next few months after an expected hike this week.

Last week, the ECB signalled it would raise interest rates as consumer inflation in June stabilised well above the bank's target. The ECB's rate-setting Governing Council meets on Thursday.

(Editing by Rex Merrifield)