Retail sales post biggest drop since euro launch

German retail sales fell by 1.8 percent last year, final figures released Tuesday by the national statistics service showed, the biggest decline since euro notes and coins were introduced in 2002.

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While the figure was better than an earlier estimate of a 2.0 percent drop, it suggested that Europe's biggest economy "will most likely have expanded only slightly" in the last three months of 2009, Commerzbank analyst Simon Junker said.

Consumption has nonetheless resisted better than expected as Germany's economy suffered its worst post-war recession, with activity contracting by 5.0 percent overall last year.

Sales picked up by a provisional 0.8 percent in December compared with November, slightly below analyst forecasts for 0.9 percent compiled by Dow Jones Newswires.

"Apparently, German consumers did not let the financial crisis ruin their Christmas shopping," ING senior economist Carsten Brzeski said.

"Still, private consumption seems to be caught in a zigzag pattern without getting to a real upward trend," he noted.

German retailers faced a tough climate in 2009 as spending dwindled amid fears about growing unemployment.

The Arcandor group shut down its Quelle mail-order division and several Karstadt department stores, rival Hertie closed down and Woolworths also shut many German outlets.

Auto sales - which are not included in the retail data - were boosted by a state car scrapping premium that expired in September, and sales have dropped since then by 7.4 percent.

Higher unemployment this year is expected to curb a recovery in consumption, while tax breaks and possible salary increases could nonetheless provide households with some financial underpinnings.

The German retailers federation HDE forecast Tuesday that nominal sales would slip by 0.5 percent this year.

Particularly cold and wintry weather last month might has already caused many people to stay at home rather than head for the high street.