Bloomberg News

German Retail Sales Declined More Than Forecast in August

September 30, 2011

(Updates with economist’s comment in fourth paragraph.)

Sept. 30 (Bloomberg) -- German retail sales declined the most in more than four years in August as concerns about the economic impact of Europe’s sovereign debt crisis sapped consumers’ willingness to spend.

Sales, adjusted for inflation and seasonal swings, slumped 2.9 from July, when they rose 0.3 percent, the Federal Statistics Office in Wiesbaden said today. That’s the biggest drop since May 2007. Economists forecast sales would fall 0.5 percent, according to the median of 18 estimates in a Bloomberg News survey. Sales rose 2.2 percent in the year.

The debt crisis is threatening to tip Europe back into recession, damping confidence even as falling German unemployment boosts household purchasing power in Europe’s largest economy. While a possible Greek default has clouded the outlook, the Bundesbank still predicts a “robust” third quarter and growth of about 3 percent this year.

The retail sales figures “are volatile and don’t reflect that the trend remains positive as consumer confidence is actually holding up relatively well,” said Christian Schulz, an economist at Joh. Berenberg Gossler & Co in London. “However, the crisis may prompt households to postpone some big-ticket purchases this winter.”

The euro declined after the release and traded at $1.3495 at 1 p.m. in Frankfurt, down 0.7 percent on the day. German retail stocks fell, extending the benchmark DAX Index’s biggest quarterly drop in nine years.

‘Close to Standstill’

Metro AG, Germany’s largest retailer, sank 5 percent to 31.69 euros. Hugo Boss AG’s preferred shares plummeted 8.7 percent to 62.62 euros, the largest drop in six weeks for the luxury-clothing company. Adidas AG, the world’s second-largest sporting-goods maker, slid 2.9 percent to 44.90 euros.

The European Commission on Sept. 15 cut its euro-region growth forecasts for the second half and warned the economy, Germany’s biggest export market, may come “close to standstill at year-end.” The International Monetary Fund in Washington on Sept. 20 also lowered its growth projections for the euro region and Germany for this year and next.

Deutsche Lufthansa AG on Sept. 20 reduced its full-year profit forecast and said it would deepen capacity cuts this winter after last month’s results were weaker than expected and forward bookings slumped.

Consumer spending in the U.S. probably slowed in August as growing pessimism and a lack of jobs restrained the biggest part of the economy, economists said. Purchases rose 0.2 percent after a 0.8 percent gain in July, according to the median estimate of 81 economists surveyed by Bloomberg News. That report is due at 8:30 a.m. in Washington today.

‘Full Tilt’

Still, French consumer spending on manufactured goods climbed in August on expectations economic growth may recover. Household spending on industrial products rose 0.2 percent, after declining 0.2 percent in July, national statistics office Insee said today. Economists expected a 0.1 percent gain.

Germany’s jobless rate fell to 6.9 percent this month, the lowest since the country’s reunification two decades ago, as companies stepped up hiring to meet export orders.

Bayerische Motoren Werke AG Chief Financial Officer Friedrich Eichiner told reporters on Sept. 8 that the Munich- based carmaker’s plants are “working at full tilt.” German rival Audi AG is hiring staff to boost output, and sports-car maker Porsche AG is seeking to fill about 130 engineering positions at its Leipzig factory.

--With assistance from Kristian Siedenburg in Vienna and Julie Cruz in Frankfurt. Editors: Matthew Brockett, Simone Meier

To contact the reporter on this story: Gabi Thesing in London at gthesing@bloomberg.net

To contact the editor responsible for this story: Matthew Brockett at mbrockett1@bloomberg.net


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