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German retail sales continue to slide

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German retail sales continue to slide
Photo: DPA
10:45 CET+01:00
German retail sales fell unexpectedly in December, seasonally corrected data released Tuesday by the national statistics office showed as the biggest European economy remained gripped by recession.

On a monthly basis, German retail sales lost 0.2 percent, their third drop running and well below an analysts' forecasts compiled by Dow Jones Newswires that had pointed to an increase of 0.5 percent. On a 12-month basis, retail sales lost 0.3 percent in December, the Destatis statistics service said.

And for all of 2008, they were 0.4 percent lower than in 2007, when they had plunged by 2.3 percent owing to an increase in the country's value added tax.

On Monday, the German GfK research institute said consumer spending should resist the effects of rising unemployment this year but warned that the global economic slump would affect consumption in 2010.

"Experts generally anticipate that the crisis will not impact decisively on the labour market and consequently consumption until 2010," a GfK statement said.

Destatis noted Tuesday that retail sales figures, which are based on data from seven German states that account for about 76 percent of all sales, are often revised and corrected its November result upwards, though it remained in negative territory at minus 0.1 percent.

The numbers do not include sales of automobiles or sales at petrol stations. Consumption is the weakest link in Germany's export-oriented economy, and officials regularly seek to boost consumer spending, especially since exports have been curbed by slowdowns or recessions in major global economies.

The German Economy Ministry has said that economic activity might contract by up to 3.0 percent this year, and the country is already in recession after the economy shrank in the last three quarters of 2008.

Last week, the German labour office said unemployment had jumped by 387,000 to just under 3.5 million people in January. Those figures showed that 8.3 percent of the German workforce was out of work in January, up from 7.4 percent in December.

"Mr. Average Citizen is fully aware of the fact that the brutal recession equals rising unemployment and less job security," noted UniCredit Group analyst Andreas Rees.

He forecast that another 500,000 jobs would be lost in Germany this year, while Commerzbank counterpart Simon Junker put the figure at 700,000. "It is unlikely - not to say illusionary - that consumer expenditure will transform itself into a growth engine," Rees concluded.

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