German retail sales grow 2.3%


German retail sales rose by 2.3 per cent in October, official data showed today, recording their biggest month-on-month gain in almost three years and pointing to a broad recovery in Europe's largest economy.

The rise was the strongest monthly gain since January 2008 and surpassed all forecasts in a Reuters poll of economists. The strongest projection was for a 2.0per cent gain.

The figures add to other recent data pointing to a robust upswing in Germany. Business morale improved in November to its strongest level since 1991, and unemployment fell in November for a 16th straight month.

"The conditions for a lasting upturn in domestic demand haven't been this good in a long time," said UniCredit economist Alexander Koch.

"There's a lot suggesting that the fourth quarter will be good and Christmas-season business will be quite good as well."

Germany's strong recovery has helped pull the euro zone to improved growth in recent quarters, but there are also concerns it may be leaving other struggling economies behind. Spending by German consumers helps to pass growth on to its European neighbours for whom it is a major export market.

On an annual basis, sales were down 0.7 per cent in real terms, the Federal Statistics Office said. But in the year through October, they rose by 2.0 per cent in nominal terms and by 1.0 per cent in real terms from the same period last year.

The data were based on sales in seven states accounting for 76 per cent of total retail turnover.

On Sunday, Germany's HDE retail industry association reported a strong first weekend of pre-Christmas shopping. The group expects overall Christmas sales to rise 2.5 per cent from 2009, and spending to grow by 1 per cent at least in 2011.

Underlining the importance of the two-month holiday season for the German market, HDE says that retailers garner around one-fifth of their annual sales from November and December.

This year, it expects growth in online business to outpace the rest of the sector considerably, with sales growing by around 8 per cent to almost €6 billion.

The pick-up is also showing at more traditional retailers.

German retailer Metro raised its 2010 profit forecast last month, saying its cost cutting efforts were ahead of plan and that eastern Europe and Asia were giving the strongest signs of economic recovery.

"We are experiencing a significant pickup of business in all regions," said chief executive Eckhard Cordes, who also noted particular difficulties, saying: "Let's be honest, the German consumer is, and remains, a difficult animal."