Frankfurt: German retail sales declined the most in more than four years in August as concerns about the economic impact of Europe's sovereign debt crisis sapped consumers' willingness to spend.
Sales, adjusted for inflation and seasonal swings, slumped 2.9 per cent from July, when they rose 0.3 per cent, the Federal Statistics Office in Wiesbaden said yesterday. That's the biggest drop since May 2007. Economists forecast sales would fall 0.5 per cent, according to the median of 18 estimates in a Bloomberg News survey. Sales rose 2.2 per cent in the year.
The debt crisis is threatening to tip Europe back into recession, damping confidence even as falling German unemployment boosts household purchasing power in Europe's largest economy. While a possible Greek default has clouded the outlook, the Bundesbank still predicts a "robust" third quarter and growth of about 3 per cent this year.
"The German economy is in much better shape than the markets would have you believe," said Carsten Brzeski, senior European economist at ING Group in Brussels. "But households are getting more worried about how the crisis will affect them and prefer to save their money rather than spend it."
The euro declined after the release. It traded at $1.3506 at 9.26am in Frankfurt, down 0.6 per cent on the day.
The European Commission on September 15 cut its euro-region growth forecasts for the second half and warned the economy, Germany's biggest export market, may come "close to standstill at year-end." The IMF on September 20 also lowered its growth projections for the euro region.
