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An unexpected decline in German retail sales dampened the expectations for a domestic-demand driven recovery.
Retail turnover in real terms dropped by a seasonally and calender adjusted 1.1% month-on-month in November, compared to a flat reading in October, a report released by the Federal Statistical Office showed on Thursday. Consensus forecast was for an increase of 0.3%.
Based on provisional data available from seven Länders, retail sales decreased 2.8% annually in November, much larger than the 1.6% fall in October and the expected 1.7% decrease. Retail sales for October was revised from a 1.7% fall estimated initially.
For the January to November period, retail sales dropped 1.8% compared to the same period of the previous year in real terms and 2.6% in nominal terms.
In nominal terms, retail sales dropped a seasonally and calender adjusted 1.2% in November from the previous month, after a flat reading in October. On an annual basis, retail sales dropped 3.1%, faster than the 2.4% decline in October.
Carsten Brzeski, a senior economist at ING bank said it is too early to give up on German consumers. The robust labor market, improvement in the disposable income due to wage increases and tax reliefs for households and high pent-up demand should keep private consumption at least stable in 2010. But, Brzeski said this will not be enough to cure Germans' fondness for precautionary savings.
According to Destatis, retail turnover in Germany is expected to be between 2.5% and 2.7% smaller than in 2008. However, in real terms, turnover is expected to drop between 1.9% and 2.1%.
Commerzbank analyst, Simon Junker noted that retail continues its downtrend that has been accelerated by the crisis. Junker said this is unlikely to change in the months ahead.
Although the economic stimulus packages and the "growth acceleration law" should mean substantial growth in disposable income this year, the retail sector will continue to suffer from the after-effects of the crisis, as the number of unemployed will climb until well into the coming year, said Junker.
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