Sales fell by 2.3 percent in real terms, preliminary figures from the Statistics Office showed at the end of October – a second monthly drop that clouded a longer view showing sales rose 1.1 percent in the year to date compared with the same period in 2009.
“This is a very weak result. It dampens the expectations that private consumption is taking off like a rocket,” said Ralph Solveen from Commerzbank. “However, one should not forget that retail sales data often fluctuate heavily and are revised frequently.”
Revisions were indeed the case for the August figures, which were pared down to a 0.4 percent monthly fall from an initial 0.2 percent.
The data was at variance with recent upbeat indicators that have buttressed hopes Germany’s stronger than expected rebound from recession will persist despite the uncertain impact of a fragile global outlook on its traditionally dominant export industries.
A survey by market research group GfK showed consumer morale remains at its highest level since May 2008 going into November on expectations of a continuing recovery, bolstering hopes that improved domestic demand will take up much of the slack if export growth runs out of steam.
Economic sentiment in the wider eurozone also remained buoyant, improving against market expectations for a flat reading, European Commission data showed.
Among German businesses, sentiment hit its highest level in three and a half years in October and firms’ expectations also improved, a survey showed, while the corporate outlook remained bright.
German sporting goods company PUMA, for example on Tuesday hiked its sales outlook and posted bumper profits, following in the footsteps of rivals Adidas and Nike to benefit from a global economic recovery.
Painful reminder
Economists are watching retail sales and other consumer data closely for evidence of a pick-up in spending, which policymakers hope will lend increasing support to the economy this year and next and partly compensate for easing export growth.
Consumer spending increases, combined with surging exports, powered the German economy to growth of 2.2 percent in the April-June quarter, and so far economists see private consumption rising by around one percent next year.
But that outlook could brighten given an increasingly sturdy jobs market, which passed a milestone in October by falling below three million in unadjusted terms, hitting its lowest level in 18 years in a development that seems likely to reassure consumers.
Economy Minister Rainer Bruederle has said domestic demand would make up three quarters of growth next year, but that would require the sustained gains in retail sales that economists now see as being in doubt.
“Today’s numbers are a painful reminder that another strong growth performance in the third quarter is on a razor’s edge,” said Carsten Brzeski from ING Financial Markets.
Adding to the mixed picture, another report released by the statistics office showed Germans were keeping their purse strings closed slightly tighter in the first half of this year.
Germans saved 11.5 percent of their income in the first six months of 2010, in seasonally adjusted terms, compared to 11.2 percent in the same period a year earlier – a sign less income was available for spending.
Some positives did emerge from the retail sales data.
On an annual basis, sales were up 0.4 percent in real terms. In nominal terms, sales fell 2.4 percent on the month but were up 1.6 percent on the year, yielding a 2.1 percent increase in the year through September.
The data were based on sales in seven states accounting for some 76 percent of total retail turnover.