German Retail Sales Surge by Most on Record

German retail sales surged the most on record in June as falling unemployment boosted household purchasing power.
Sales, adjusted for inflation and seasonal swings, rose 6.3 percent from May, when they fell 2.5 percent, the Federal Statistics Office in Wiesbaden said today. That’s the strongest increase since 1991, when data for a reunified Germany were first available. Economists had forecast a gain of 1.7 percent, the median of 22 estimates in a Bloomberg News survey showed. Sales dropped 1 percent in the year.
The German economy, Europe’s largest, is weathering the region’s sovereign-debt crisis as companies step up hiring to meet export orders, fueling consumer spending. The Bundesbank last month raised its 2011 growth forecast to 3.1 percent from 2.5 percent, citing stronger domestic demand.
“German consumers are finally waking up,” said Carsten Brzeski, senior economist at ING Groep in Brussels. “Of course, the rather discouraging track record of German retail sales is reason enough not to get overly excited. However, German consumers offer some glimmer of hope that at least the German economy is heading towards a soft, not hard, landing.”
The statistics office said this month it exchanged about 8,100 companies representing 33 percent of the sample it uses to calculate the monthly retail sales statistics. It will swap another 17 percent of reporting firms next year.
‘Significant Weaknesses’
The Bundesbank said on July 18 that the retail sales statistical series has “significant weaknesses” and last month’s decline is “without validity.”
Unemployment dropped for a 25th straight month in July, keeping the jobless rate at 7 percent, the lowest since reunification.
Metro AG, Germany’s biggest retailer, on July 26 confirmed its earnings forecast for 2011, saying it expects profit before extraordinary items to rise about 10 percent. Still, the company’s Media-Saturn household electronics unit posted its first operating loss in at least 20 years in the second quarter as sales dropped in Germany.
The threat of higher energy prices will contribute to a decline in consumer confidence in August, market research company GfK said this week. Oil prices rose 2.2 percent this month and inflation accelerated to 2.6 percent from 2.4 percent in June.
“The employment situation in Germany is excellent and provides the foundation for an increase in real disposable income,” said Jens Kramer, an economist at NordLB in Hanover. “That should support private consumption. It won’t become the main growth pillar, but it will support growth driven by demand from abroad.”
To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net.
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
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