German retail sales fall sharply

02 November 2010

WIESBADEN: Retail sales in Germany slumped by 2.3% in September, despite improving labour market conditions.

The official figures from the country's Statistics Office contrasts with analysts predictions' of a 0.4% rise.

Instead, sales fell at the sharpest pace since March 2008.

Economist Carsten Brzeski of ING Financial Markets said that the latest statistics were a "clear disappointment".

But he added that the numbers had to be "taken with a pinch of salt", as German retail sales figures were often revised following the release of initial data.

The German economy, Europe's largest, is experiencing strong growth at present, having largely recovered from the worst of the recession on the back of a surging export sector.

Unemployment has fallen to 7%, dipping below three million people for the first time in recent history.

Moreover, Germany's central bank, the Deutsche Bundesbank, has lifted its growth forecast for the economy this year, revising its previous 2010 forecast of 1.9% to a more cheering 3%.

The German economy grew by a record 2.2% in the second quarter of the year – the fastest quarterly growth the country has seen in 20 years.

Therefore, falling retail sales suggest that cautious consumers are using more of their income to pay back debts or to boost their savings and investments.

Data sourced from Reuters; additional content by Warc staff