German Retail Sales Improve

06 July 2005

The slumbering Germany economy is showing signs of life.

Retail sales in Europe's economic powerhouse rose in May as job prospects improved and oil prices eased temporarily. The Federal Statistics Office reports April sales bettering March by 1.2%, confounding analysts who expected them to remain unchanged. Year-on-year sales rose 2.7%.

Says Henrik Gullberg, an economist at 4Cast in London: "There are signs of improvement in the labor market, and that should underpin consumption in Germany."

The jobless total, which is near its highest since the Second World War, dropped by 0.1% in June from May's 11.8%.

Chancellor Gerhard Schroeder has introduced tax cuts worth around €6.5 billion ($7.77bn; £4.38bn) in a bid to kick start consumer spending.

Comments Annemarieke Christian, an economist at Morgan Stanley in London: "At some point the income tax cuts should kick in and as people see the economy picking up, they should start spending. It's a confidence issue in Germany."

To support investment and consumption, the European Central Bank will probably keep its main lending rate at a six-decade low of 2% for a 25th month when policy makers meet in Frankfurt tomorrow (July 7), a Bloomberg survey of economists predicts.

Data sourced from; additional content by WARC staff