Milder winter hits retail sales in Germany

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German retail sales fell unexpectedly in January, preliminary data showed yesterday, as a mild winter stifled spending in Europe’s largest economy.

The notoriously volatile indicator fell 1.6 per cent in real terms month-on-month, data from the Federal Statistics Office showed, missing forecast gains of 0.5 per cent in a Reuters poll of 19 economists.

But the indicator was up 1.6 on an annual basis in real terms, well above a forecast of 0.2 per cent.

“The January results are a disappointment. In the mild weather much less winter clothing and winter sports articles were sold,” said economist Rainer Sartoris at HSBC Trinkaus.

“But consumption can improve during the year. The labour market is good and it looks as if wages could rise significantly,” he said.

The results followed a significant upward revision of December’s worse-than-expected retail sales.

Germany’s export-driven economy bounced back quickly from the 2008/9 financial crisis, but worries about the eurozone debt crisis have cast a shadow on Europe’s bulwark economy.

Many economists expect at least one quarter of contraction in Germany as global demand falls and the region’s debt crisis affects its key neighbouring export markets. The German economy shrank by 0.2 per cent in the fourth quarter on sagging exports and private consumption.

But a solid job market has helped prop up spending and consumer surveys remain upbeat.

Consumer confidence hit a one-year high going into March, and January’s better-than-expected year-on-year retail sales point to private consumption as a bright spot that can weather bad news.