Real, seasonally adjusted retail sales:

October: +0.7% m/m, -0.4% y/y

MNI survey median: +0.2% m/m, +2.1% y/y
MNI survey range: flat to +0.4% m/m

September: +0.3% m/m, +0.6% y/y
—

FRANKFURT (MNI) – German retail sales surprised to the upside in
October, rising to their highest level in nearly three years, the
Federal Statistical Office reported on Wednesday.

On the month, turnover increased by 0.7%, beating all forecasts,
though still leaving sales down 0.4% compared to one year ago. Compared
to the third quarter, sales were up 0.7%.

Disaggregating the annual figure, food drink and tobacco sales were
1.0% lower, while non-food sales were up 0.3%.

Expanding employment and rising wages, as well as low borrowing
costs, should support household spending in the near term, thereby
building on the 0.8% recovery in private consumption in 3Q.

November retail PMI survey showed sales rising at the fastest clip
since April, lifting the headline figure to 54.3, well above its
long-run average (49.7). Retailers expect the positive trend to continue
with Christmas on the horizon, but expressed concern regarding the
uncertain economic outlook.

In line with the latest PMI results, consumers demonstrated an
increased willingness to spend this month, lifting the GfK indicator to
its highest level since the start of the year.

“The financial crisis has shaken Germans’ trust in the financial
markets,” GfK noted. “Consequently, the willingness to set money aside
is not particularly pronounced at the moment, especially as interest
rates on investments are very low.”

The Organisation for Economic Cooperation and Development expects
private consumption to grow by 0.8% next year after +0.4% this year,
noting that households do not need to reduce their indebtedness and may
even cut back on savings.

The European Commission is also optimistic: “In comparison to other
member states, the medium-term outlook for private consumption is
further supported by the absence of large deleveraging needs in the
household sector, as well as a relatively limited restraining effect
from fiscal consolidation needs.”

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

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