German retail sales dip in November, trend still strong

German retail sales fell 0.9 per cent on the month in November but the Federal Statistics Office said that figure would probably be revised after a bullish Christmas that may have helped sales to their fastest full-year growth since 2004.

Retail sales likely rose between 1.1 and 1.3 per cent in real terms in 2011, and between 2.7 and 2.9 per cent in nominal terms, the Office said in an initial estimate, pointing to strong private consumption that is offsetting a decline in external trade for Europe's largest economy.

"Record employment, cheap financing conditions and the weak incentives to save due to lower interest rates are helping retail sales," said Stefan Schilbe at HSBC Trinkaus. "In addition oil prices no longer rose in the second half-year."

"As long as the labour market does not worsen considerably, consumption will continue to support the economy," he said.

The notoriously volatile indicator dropped 0.9 per cent on a monthly basis in real terms, missing expectations in a Reuters poll of economists for an unchanged reading and suggesting consumption was not immune to the euro zone crisis.

It was bang in line with forecasts for a 0.8 per cent rise year on year.

German DIY store operator Praktiker said on Thursday its fourth quarter sales were down 4.5 per cent.

But Germany's HDE retail association has said retailers saw a strong finish to the Christmas season with turnover for the period expected to be 1.5 per cent above year-ago levels.

The Statistics Office said it would probably revise up the preliminary figure, and analysts said they expected stronger retail sales data for December due to upbeat reports on Christmas trading.

"An improvement should be on the cards," said Christian Schulz at Berenberg Bank. "The fall in retail sales in November may thus be revised upwards later, and in any case is likely to be followed by better December data."

The HDE also said it expected full-year 2011 turnover to be up 2 per cent.

Berenberg's Schulz said other factors should support consumption this year: "The labour market has improved further and the rebound in confidence indicators has accelerated."

Data earlier this week showed unemployment falling more than expected in December, with the jobless rate falling to the lowest level since the unification of Germany two decades ago.

Furthermore German consumer morale unexpectedly held steady going into January, as income expectations and views of the economy improved.

The deepening euro zone debt crisis and a global slowdown are set to hit exports and investor confidence, reducing German economic growth to around 0.5-1.0 per cent this year from some 3 per cent in 2011.

October retail sales were also revised to a drop of 0.2 per cent on the month, from a previously reported gain of 0.7 per cent. Sales on an annual basis were revised downwards to -0.6 per cent from -0.4 per cent.