German retail sales dropped at the steepest pace in more than four years in August as mounting concerns about the potential impact of the region's debt crisis made consumers reluctant to spend.
The latest figures from the Federal Statistical Office revealed that sales, adjusted for inflation and seasonal variations, fell 2.9 percent month-on-month in August, the worst since May 2007, following a 0.3 percent increase in July and a 4 percent increase in June. Economists expected a milder 0.5 percent slump in sales.
However, retail sales increased 2.2 percent year-over-year, confounding economists' expectations for a 1 percent decline. This was the first increase in three months and follows a 1.8 percent drop in July.
Sales of food articles grew 2.2 percent compared to a year earlier, while spending on non-food products advanced 2.5 percent.
Meanwhile, total retail sales for the January to August period, grew 1.2 percent compared to the same period last year.
The lingering debt troubles in the region is weakening consumers' propensity to consume, though the country's falling unemployment level is boosting households' purchasing power.
The results of a survey by market research group GfK indicated Tuesday that consumers were downbeat about economic prospects and were less willing to buy big ticket items.
However, the GfK report said that consumer sentiment may stabilize in October, despite escalating debt woes, due to pleasing labor market conditions. Germans expect income to rise further next month.
According to official figures released Thursday, German unemployment continued to decline, while the number of persons in employment rose to a record high during the month.
The GfK report noted that the trust of consumers in their government's ability seriously suffered on account of the intense and somewhat contradictory debates on how to tackle the debt crisis. This loss of trust is now clearly also having an impact on consumption, it said.
The Organization for Economic Co-operation and Development, or OECD, said earlier this month that major industrialized nations are likely to see weak growth in the latter half of the year, with Germany and Italy expected to post at least one quarter of negative growth.
The European Commission expects growth in Eurozone to come to a standstill towards the end of this year, while EU Economic and Monetary Affairs Commissioner Olli Rehn ruled out chances of a recession. The Commission projects Germany to grow by 2.9 percent in 2011.
The French statistical office said today that consumer spending in France recovered in August due to a slight improvement in car purchases and spending on energy.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.