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Oct 31, 2007
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German retail sales show one-month surge in September

By
AFP
Published
Oct 31, 2007

FRANKFURT, Oct 31, 2007 (AFP) - German retail sales were stronger than expected in September but fell on a yearly basis for the second month in a row owing to a calendar effect, official figures released on Wednesday, October 26th showed.



Retail sales in the biggest eurozone economy rose by 2.3 percent on a monthly basis, posting a much sharper increase than the 0.9 percent average forecast of analysts polled by Thomson Financial News.

They had fallen in August by 1.6 percent from the level in July.

On a 12-month basis however, retail sales dropped by 2.2 percent following a decrease in August, with the federal statistics office Destatis noting there had been one less shopping day in September 2007 than in the same month a year earlier.

Analysts warned against reading too much into the September increase, which might not be repeated this month.

On a 12-month basis, food and tobacco showed the sharpest falls meanwhile, down by 4.6 percent, a statement said.

In categories such as clothing, footwear, cosmetics, medicines and mail-order however, sales rose on the year, Destatis said.

German unemployment has been steadily decreasing this year, and wages have also risen somewhat as the economy expands, prompting repeated forecasts that household consumption, traditionally the country's weakest economic link, would pick up.

But on Tuesday, analysts took a cautious view of the figures.

At IXIS-CIB, economist Sylvain Broyer forecast that "consumption will improve next year, while only moderately."

He noted that labour income has already gained 3.0 percent this year and said sluggish private spending was the result of "a strong increase in consumption and households' taxes."

Germany raised its value added tax in January from 16 to 19 percent.

Commerzbank analyst Matthias Rubisch said that while the September figures were good, "higher energy and food costs are eroding real purchasing power and undermining consumer sentiment."

He added that the figures appeared to have been distorted by an 11.7 percent annual increase in clothing sales, estimating that "cold weather evidently prompted shoppers to invest in the new autumn collection."

October would thus likely see a sharp dip in comparison, Rubisch suggested.

With private spending still sluggish, he warned that "consumption will hardly meet the high expectations made of it next year."

In addition to sharp real increases in the cost of food and energy, "general talk about rising food prices and higher inflation rates will no doubt have helped to unsettle consumers," the analyst said.

Broyer forecast German consumption would rise by 1.8 percent in 2008, but Rubisch put the figure at 1.5 percent.

That "would be the strongest result for seven years, but this hardly constitutes a boom," he noted.

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