Sat, Jul 30, 2011 - Page 10 News List

German retail sales surge as unemployment slides

Bloomberg

German retail sales surged the most on record last month 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 yesterday. That’s the strongest increase since 1991, when data for a reunified Germany was 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 growth forecast for this year 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 toward 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.

The Bundesbank said on July 18 that the retail sales statistical series had “significant weaknesses” and last month’s decline was “without validity.”

This month, unemployment dropped for a 25th straight month, keeping the jobless rate at 7 percent, the lowest since reunification.

Metro AG, Germany’s biggest retailer, on Tuesday confirmed its earnings forecast for this year, 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.

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