German retail sales unexpectedly dropped for the first time in three months in July amid a continued rise in unemployment, raising concerns that consumer spending may fail to underpin growth of the biggest Eurozone economy grappling with the sovereign debt crisis and the threat of a possible recession in the currency-bloc.
Retail sales fell a calendar-and-seasonally adjusted 0.9 percent month-on-month following a 0.5 percent increase for June and a flat reading for May, the Federal Statistical Office reported Friday. Economists had expected sales to grow 0.2 percent in July.
Sales fell 1 percent from the same month a year ago after rising 3.7 percent in June. This was the biggest drop since April. Economists had forecast a modest growth of 0.1 percent.
Recent signals from the economic front has been worrying for Germany as the euro area confronts a recession. While the labor market resilience is disappearing fast, inflation is accelerating.
Unemployment increased for the fifth straight month in August and at a greater-than-expected pace, data from the Federal Labor Agency revealed yesterday. That said, employment is also rising, providing a balancing effect on the economy.
Confidence among German consumers is set to remain unchanged in September, as rising disposable incomes offset growing recession fears among households, a survey by market research firm GfK said earlier this week. Germans' economic expectations dropped quite significantly for the third time in a row.
German consumers are increasingly worried the economy will also fall a victim to recession like several other Eurozone countries, GfK said. Private consumption rose by around 1.2 percent in the first six months of 2012, which was within the scope of the GfK forecast of 1 percent growth for the year.
Gross domestic product expanded 0.3 percent in the second quarter, after the 0.5 percent growth registered in the first quarter of the year.
The outlook for exports, a linchpin for the German economy, remains uncertain due to the debt crisis and recessionary trends in the rest of Eurozone. The latest survey by Ifo Institute revealed deterioration in business climate for the fourth straight month in August.
by RTT Staff Writer
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