German retail sales gain 0.4 pc in May

July 1, 2010

, FRANKFURT, Jul  1 – German retail sales rose by 0.4 percent in May from the April level, official data showed on Thursday as shoppers showed some confidence in the German economy, the biggest in Europe.

Analysts polled by Dow Jones Newswires had forecast an increase of 0.5 percent.

But the data marked a rebound from a revised 0.5-percent drop in April, prompting ING senior economist Carsten Brzeski to say the data "brought some evidence that German consumers can still spend."

On a 12-month basis, retail sales fell by 2.4 percent however, the Destatis statistics office said, though Germany was in the midst of a landmark recession this time last year.

In the first five months of 2010, they were down by 1.3 percent compared with the same period a year earlier, despite a pick up in economic activity.

German unemployment edged lower in May to 7.5 percent of the workforce from 7.7 percent in the previous month, but consumer confidence slipped lower that month owing in part to the eurozone debt crisis.

It has stabilised since then however.

Germans are traditionally more inclined to save than to spend, which has frustrated European neighbours who urge Berlin to boost domestic demand and rely less on exports for economic growth.

"Sluggish domestic demand is the Achilles\’ heel of the German recovery," Brzeski agreed, though he also cautioned that the country\’s retail sales numbers were those most often revised later.

And while stronger economic data was not enough to boost spending, "the soccer World Cup could provide the crucial spark," he said in reference to a strong showing in South Africa by the German team.

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