German retail sales unexpectedly jump, point to strong first quarter

Monday 31 March 2014 08.43
German retail sales up by 1.3% in February
German retail sales up by 1.3% in February

German retail sales unexpectedly jumped in February, marking the second consecutive monthly increase and pointing to a strong rise for the quarter that would boost overall growth in Europe's largest economy.

Data from the Federal Statistics Office showed retail sales rose 1.3% in real terms on the month, beating even the highest forecast in a Reuters poll of economists for a gain of 0.8%. 

The consensus forecast was for a 0.5% fall.

The indicator for German retail sales is notoriously volatile, however, and the figure for January was revised down to a rise of 1.7% from an originally reported 2.5%. 

Analysts said that wage negotiations are promising generous pay increases for German households, which will likely boost consumption.

Market researcher GfK has said workers in pay negotiations were likely to get increases of 3% or more this year. Trade union Verdi heads into the third round of negotiations on wage rises for public sector workers today. It wants a total increase equivalent to around 6.7%.

Germany has relied on domestic demand to bolster growth over the past year as a weak global outlook and the euro zone crisis weighed on exports, traditionally the driver of the economy there.

But uncertainty also dampened spending at home last year, and the economy grew just 0.4%. Economists and the government expect expansion of around 1.8% in 2014, thanks to robust private consumption and a pickup in investment.

A GfK survey last week showed German consumer morale held steady going into April as shoppers were more upbeat about the economic outlook, but their mood could worsen if the Crimea crisis spreads and leads to tougher sanctions from the West.

GfK expects private consumption spending will increase by 1.5% in real terms this year.