Seasonally adjusted real sales:

June: -0.9% m/m, +3.1% y/y

MNI survey median: +0.3% m/m, +0.6% y/y
MNI survey range: -1.5% to +0.8% m/m

May: +3.0% m/m, -0.7% y/y (revised from -0.4%/-2.4%)
—

FRANKFURT (MNI) – Turnover in the German retail sector unexpectedly
fell in June, the Federal Statistical Office reported on Friday.
However, with May’s result upwardly revised to an strong increase from a
modest fall, sales still managed a slight gain on the quarter.

On the month, sales slipped 0.9%, giving back part of May’s 3.0%
jump for a 3.1% gain on the year, the strongest since March. On the
quarter, turnover was up by just over 0.3% compared to the 1Q average.

Food, drink and tobacco sales, for which only annual changes are
published, gained 1.0% on the year, while non-food turnover saw a
whopping 5.1% rise compared to one year ago.

The 1.6-point rise in Markit Economics’ retail purchasing managers
index (PMI) to 57.2 in July, its highest print since November 2006,
suggests that retail sales rebounded this month. The rise was attributed
to World Cup football spending, as well as better labour market
conditions, noted Markit economist Tim Moore.

“Improved confidence in the sector was also highlighted by a modest
rise in retail employment and the fastest build-up of stocks of goods
for resale in just over two years,” he added.

Reflecting households’ robust tendency to spend, retailers polled
by the European Commission this month reported a vast improvement in
both the current and expected business situations to levels well above
their respective long-term averages. As a result, optimism in the retail
sector rose to its highest level in 19 years.

A brighter business climate in retailing was also noted in the most
recent Ifo survey, where the indicator jumped to its highest level in at
least three and a half years on the back of a better current situation
and more optimistic expectations.

While consumers’ spending propensity fell back this month after
reaching a 10-month high in June, the inclination to buy is still viewed
as “extremely good” and well above the long-term average, the GfK Group
said in its recent report.

With unemployment falling to a 20-month low of 7.5% in July and the
number of job vacancies rising yet again last month, households may find
little reason to curb consumption in the near term. According to the
latest Commission sentiment report, unemployment fears plummeted to
two-year lows this month.

However, it remains to be seen how long the strength Germany’s
labour market lasts.

Government support measures, which have are largely credited with
the country’s resilient labour market, are set to expire in two years,
creating a risk that unemployment could rebound and consumers feel the
need to rein in their spending.

— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —

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