Monday, April 30, 2007

German Retail Sales Register Surprise Fall In March, Monday, April 30, 2007 9:00:12 AM

German retail sales unexpectedly fell in March, after a slight recovery in the prior month, official data indicated Monday.

The Federal Statistical Office said retail sales dropped real 0.7% on month in March, while economists were looking for a rise of 0.8%.

The decline follows an upwardly revised 1% gain in February. Initially, the monthly increase was recorded as 0.9%. The monthly increase in retail sales in February came after a 5.7% slump in January due to VAT hike. The Angela Merkel administration raised the VAT to 19% from 16% on January 1.

On yearly basis, retail sales rose real 0.5% in March, while markets expected an annual decline of 0.6%. In February, retail sales fell 1.6% on year.

In nominal terms, retail sales slid 0.6% and rose 1.3% annually in March.

The provisional results are computed from data release by seven landers of the Federal Republic that accounted for nearly 66% of total retail sales.

Food, beverages and tobacco group logged 0.3% yearly increase in retail sales. Sales in supermarkets, self-service department stores and consumer markets gained 0.7%. In specialized retail trade with food, retail sales slumped 4.2%.

Non-food retail sales climbed real 0.7% on year, with four out of six industries registering growth. Textiles, clothing, shoes and leather goods sales as well as sales of furnishings and related goods jumped 4.6% each. In other retailing, sales enhanced 2.0%, while in other specialized retail trade sales moved up 0.8%.

During the period from January to March 2007, retail sales declined real 1.2% over the same period last year. Nominally, the fall was 0.5%.

Meanwhile, a slew of reports released last week gave positive signals for the largest Euro zone economy. The GfK Consumer confidence report showed that German consumer confidence improved more than expected in April. The forward looking consumer climate indicator surged to 5.5 points for May from 4.4 in April.

The Nuremberg-based GfK said, “With the ending of the anticipated weak phase, the consumer climate made a significant recovery in the first quarter of 2007. Consumer expectations in terms of the economy reached an all-time record level this April, with income expectations and the propensity to buy also on an upward trend.”

The German government raised its 2007 GDP growth forecast to 2.3% from 1.7% earlier. Growth for 2008 is estimated at 2.4%. Many economic research institutes also upgraded their 2007 growth forecasts to 2.4%, which is significantly higher from the 1.4% prediction last autumn.

Business sentiment improved more-than-expected in April, the closely watched Ifo survey indicated Wednesday, as manufacturers brushed aside a stronger euro. The headline index is holding very near its peak of 108.7 attained in December 2006. German business sentiment enhanced for the second month in a row in April.
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