Seasonally adjusted real sales:

May: +0.4% m/m, -2.4% y/y

MNI survey median: +0.5% m/m, -0.5% y/y
MNI survey range: +0.4% to +1.0% m/m

April: -0.5% m/m, -3.6% y/y (revised from +1.0%/-3.1%)

—

FRANKFURT (MNI) – German retail sales rose broadly as expected in
May, rebounding 0.4% m/m after two months of decline, the Federal
Statistical Office reported on Thursday.

Taking into account the significant downward revision in the
previous month, May’s rise, which was on the low side of analysts’
forecasts, left turnover down 2.4% on the year. Compared to the first
quarter, average turnover in April and May was down 0.03%.

Disaggregating the annual figure, food, alcohol and tobacco sales
were 5.3% lower compared to May 2009, while non-food sales were up 0.1%.

Thanks to better weather and soccer’s World Cup, retail sales rose
further in June, boosting the retail purchasing managers index (PMI) to
54.1, its highest level in just over a year, said Markit Economics, the
firm that publishes the PMI results.

The PMI poll also highlighted ongoing pressure on operating
margins, which are squeezed between higher costs due to the weak euro
and declining sales prices due to tough competition.

German households’ buying propensity rose significantly in June to
the highest level since September, the GfK market research group said,
but it cautioned this might be a only one-off boost linked to the soccer
championship.

Indeed, retailers’ assessment of current business improved
considerably in the second quarter, the European Commission’s surveys
show. But their outlook for turnover in the months ahead fell sharply in
June.

The Commission’s latest survey also reveals an erosion in
households’ outlook for family finances over the coming year, which may
reflect growing concerns about the impact of fiscal tightening ahead.

The German Retailers Association fears that an increase in local
taxes “could weigh on consumer sentiment” and dampen retail spending. It
expects retail turnover to decline by 0.5% in real terms this year.

The DIW think tank argues that the sovereign debt crisis is sapping
consumer morale and expects the government’s austerity policies to add
to the gloom. It sees domestic demand remaining this year.

On the other hand, the ongoing recovery in employment will bolster
disposable incomes and may counter some of the fallout from the
financial crisis.

Payroll jobs increased by 38,000 in May in seasonally adjusted
terms after a 41,000 rise in April, while job vacancies in June rose by
6,000, matching May’s increase.

Firms polled for June’s PMI reported job creation levels in the
private sector approached May’s 22-month high, with both services and
manufacturing boosting staff levels.

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

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