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Weak German sales offer no support to economy

BERLIN - German retail sales unexpectedly fell for a third consecutive month in December, suggesting private consumption probably did little to temper one of the worst quarters in recent history for Europe’s largest economy.

Preliminary Federal Statistics Office data on Tuesday showed that adjusted for seasonal swings, retail sales fell by 0.2 percent on the month in December, the third straight monthly drop. Year-on-year, sales fell 0.3 percent in real terms.

The mid-range forecast of analysts polled by Reuters last week was for December’s retail sales to rise by 0.5 percent month-on-month and by 0.7 percent year-on-year EUROLANDFEB.

Retail sales have been comparatively stable compared to traditional mainstays of the economy like exports and industrial output, and many have hoped it can help offset troubled sectors.

“On balance the numbers are bad ... We can’t expect retail spending to support the economy this year,” said Ulrike Kastens, an economist at Sal. Oppenheim.

Figures released by the Bundesbank after the Statistics Office data showed a broader retail measure including vehicle sales and gas station receipts also fell on the month.

“The hopes that business over Christmas would bring a genuine boost to all of Germany haven’t really been realised, ... but compared to many other countries, it’s not really that dramatic,” said Marco Bargel from Postbank.

Government sources told Reuters last month the German economy probably contracted by between 1.5 percent to 2.0 percent on the quarter in the October-December period, following on from two previous quarters of negative growth.

That would be the economy’s worst quarterly showing since German reunification in 1990.

Real wage gains?

Later on Tuesday, German retailers’ association HDE said economic uncertainty made forecasting hard. It estimated nominal retail sales would be either be flat or down by up to one percent in 2009 -- a fall of 1-2 percent in real terms.

“The economic crisis will hit our sector, but when, how hard, and for how long is uncertain,” HDE Managing Director Stefan Genth told a news conference.

On Monday, market research group GfK gave an upbeat report for the sector, saying easing inflation and delayed effects of the recession should help German annual consumer spending rise by up to 0.5 percent in 2009.

Analysts say despite the downturn and threats to employment, a sharp slowdown in inflation could be this year’s silver lining and bring Germans their first real wage increase in years.

But any positive push to sentiment could be overtaken by unemployment, should it start to rise more dramatically.

“It’s obvious the outlook is bad because unemployment is rising,” said Andreas Rees at Unicredit. “Pressure on consumers is going to grow, which means there’s a risk that consumption is going to contract in the second half of the year.”

Times have already been tough for some German retailers, with thousands of job cuts announced.

Retailer Metro AG MEOG.DE said last month it aimed to cut about 15,000 jobs by 2012 as part of a restructuring programme.