April 30, 2012 / 7:58 AM / 7 years ago

German retail sales see modest rise in March

BERLIN (Reuters) - German retail sales rose less than expected in March, preliminary data showed on Monday, raising concerns about the support that private consumption can provide for the German economy in a period of flagging global demand.

The notoriously volatile retail sales indicator was up 0.8 percent in March on a monthly basis in real terms, below a consensus forecast for a rise of 1.0 percent.

On an annual basis, however, retail sales rose 2.3 percent, well above a forecast 0.5 percent rise.

“German retail sales remained lackluster despite very positive fundamentals such as low unemployment and falling inflation,” said Christian Schulz at Berenberg Bank.

“Against the background of unemployment at its lowest since reunification, falling headline inflation rates and a pick-up in wage growth, German consumption remains relatively weak,” Schulz said.

Private consumption, boosted by a solid labor market, has long been regarded as Germany’s economic trump card which can support the economy through any rough weather and withstand any bad news.

Germany’s low jobless rate, which sank to a new two-decade low in March, as well as recent wage deals that have so far outstripped inflation, look set to bolster consumption.

In March, public sector trade union Verdi sealed a deal for a 6.3 percent wage increase over two years for its 2 million workers.

However, rising fuel prices have begun to take their toll on consumer confidence and any wobble in private consumption would be particularly worrying at a time when Germany is seeing a slowdown in demand for its exports in the euro zone and Asia.


Consumer sentiment fell for the second month in a row heading into May as rising fuel prices continued to unsettle consumers.

On Friday, export prices saw their slowest growth in two years in a sign that demand for Germany’s high-end exports was beginning to weaken.

February’s retail sales on an annual basis sales were upwardly revised to a gain of 2.1 percent from a 1.7 percent rise.

Month-on-month sales in February were also revised upwards, but still posted a fall of 0.9 percent after rising fuel prices hit spending hard.

“March retail sales data and also consumer confidence data for April show that it is rising prices that affect consumption in Germany at the moment, probably more than any worries about the euro confidence crisis,” Schulz said.

Germany’s export-driven economy bounced back from the 2008/09 financial crisis but shrank 0.2 percent in the final quarter of 2011 after the euro zone’s debt troubles and a global slowdown hit exports and private consumption.

Economists now say this was a glitch and that Europe’s largest economy will remain stable in the first quarter before returning to growth from the second quarter onwards.

Germany’s eight leading economic institutes revised their growth forecasts for 2012 upwards slightly to 0.9 percent, while the government has stuck to its 2012 forecast of 0.7 percent.

Reporting by Alice Baghdjian, editing by Gareth Jones

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