Retail sales in Germany, Europe's largest economy, unexpectedly
declined in March for a second month as accelerating inflation left
consumers with less money.
Sales, adjusted for inflation and seasonal swings, fell 0.1 percent
from February, when they dropped 0.7 percent, the Federal Statistics
Office in Wiesbaden said today. Economists forecast a gain of 0.6
percent, the median of 29 estimates in a Bloomberg News survey shows.
In the year, sales fell 6.3 percent.
Rising food and energy prices pushed German inflation to 3.3 percent in
March, matching a 12-year high reached in November. With companies
hiring workers and raising wages, demand may help bolster an economic
expansion this year. Consumer confidence unexpectedly increased this
month.
``Rainy weather and the high inflation rate likely burdened retail
sales in March,'' said Alexander Koch, an economist at UniCredit
Markets & Investment Banking in Munich. ``Still, due to higher
wages and the robust labor market, consumption will support economic
growth a bit this year.''
In the economy of the 15 euro nations, retail sales declined for a
second month in April, the Bloomberg purchasing managers' index showed
April 29. German retailers' gross margins contracted for a 16th month
and about 44 percent of companies said they missed their sales targets
in April.
`Positive' SentimentPraktiker AG, Germany's second-largest home-improvement retailer, said
April 23 that its first-quarter loss widened on weaker demand. Chief
Executive Officer Wolfgang Werner said that ``the first three months
were very bad in domestic sales.''
Still, while German consumer confidence unexpectedly rose to a
seven-month high, according to GfK AG, inflation ``must weaken in the
next few months'' for sentiment to ``continue its positive
development,'' the market-research company said on April 28.
German consumer prices, based on a harmonized European Union method,
rose 2.6 percent in April from a year earlier. In Europe, inflation
slowed more than economists forecast to 3.3 percent in April from 3.6
percent the previous month, the European Union's statistics office in
Luxembourg said April 30.
Rising employment may also help bolster consumer demand and give labor
unions more leeway in wage talks. German unemployment declined in April
for the 27th month, the Federal Labor Agency said on April 30. The
adjusted jobless rate is 7.9 percent.
Some companies are already raising salaries. German wages increased the
most in 12 years in January, the statistics office said on April 29.
Germany's Ver.di union in March negotiated a settlement for as many as
2.1 million public-sector staff that is worth 8.9 percent over two
years.
``The German labor market should lose dynamic in the months ahead,''
said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt.
``We expect a deceleration in growth dynamic in the second half of
2008'' after a ``robust'' first six months.
To contact the reporter on this story: Simone Meier in Frankfurt at
smeier@bloomberg.net
