German Retail Sales Recover In July

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German retail sales recorded a monthly growth in July after declining in the previous two months, official data showed Tuesday.

Retail turnover rose by a real 0.7% month-on-month in July after falling 1.3% in June, provisional results from the Federal Statistical Office showed Tuesday. Retail sales growth matched expectations. Annually, retail sales slipped 1%, slightly slower than the expected decline of 1.2%.

Food, beverages and tobacco sales moved up 0.1% on a yearly basis in July, while non-food product sales dropped 1.5%.

In the January to July period, retail sales dipped 2% compared to the same period of the previous year.

In nominal terms, retail sales edged up 0.1% in July from the prior month taking the annual fall to 2.3%. For the first seven months of the year, retail sales were down 2% over a year ago period.

According to a monthly survey conducted by the market research firm GfK, consumer confidence for September rose to 3.7 from 3.4 points in August.

The survey also found that the propensity to buy stood at 31.1 points in August, its highest position since December 2006. This link between consumers' price expectations and their willingness to buy had been witnessed in the past, GfK said.

German consumer prices remained unchanged on an annual basis in August, compared with a 0.5% fall in the previous month. Meanwhile, the harmonized index of consumer prices dropped 0.7% annually.

Commenting on the retail sales data, Ralph Solveen, Commerzbank analyst said the trend in retail sales is still downwards despite the slight recovery. This assessment was based on two factors. First, the labor market situation has generally deteriorated in the past months, though the huge slump has not materialized so far.

Secondly, the figures prepared by the statistical office exclude car sales. Accordingly, the scrapping incentive could have a negative effect as some people have probably put off making other purchases in favor of buying a new car, Commerzbank said.

Last week, Destatis reported that final consumption expenditure of households rose 0.1% year-on-year in the first half of 2009, boosted by the car scrappage scheme. Without the purchases of passenger cars, household final consumption expenditure would have dropped 1%, the statistical office said.

Analyst expects the downward trend to continue in the months ahead. Although the deferment of other sales due to the scrapping premium on cars will lose importance in the coming months, the labor market conditions should increasingly worsen. Consequently, private spending would give no impulses for the economy in the second half of the year.

However, this does not change the fact that high GDP growth rates are to be expected in the third and fourth quarter, Solveen added. Pick up in exports and the inventory cycle turns will more than compensate the weakness in private consumption.

German retail sales recorded a monthly growth in July after declining in the previous two months, official data showed Tuesday. (Market News Provided by RTTNews)