UPDATE 2-German retail sales dip, take edge off growth story

* Biggest monthly sales drop in real terms since March 2008

* August real monthly sales figures revised down

* Yr through Sept shows real +1.1 pct y/y rise, +2.1 nominal

* Data clouds German consumer demand picture

(Adds economist quote, details, background)

By Brian Rohan

BERLIN, Oct 29 (BestGrowthStock) – German retail sales posted their
biggest monthly drop in 2-1/2 years in September, clashing with
recent figures that had painted a rosier picture of consumer
demand in Europe’s largest economy.

Sales fell by 2.3 percent in real terms, preliminary figures
from the Statistics Office showed on Friday — a second monthly
drop that clouded a longer view showing sales rose 1.1 percent
in the year to date compared with the same period in 2009.

“This is a very weak result. It dampens the expectations
that private consumption is taking off like a rocket,” said
Ralph Solveen from Commerzbank. “However, one should not forget
that retail sales data often fluctuate heavily and are revised
frequently.”

Revisions were indeed the case for the August figures, which
were pared down to a 0.4 percent monthly fall from an initial
0.2 percent.

The data was at variance with recent upbeat indicators that
have buttressed hopes Germany’s stronger than expected rebound
from recession will persist despite the uncertain impact of a
fragile global outlook on its traditionally dominant export
industries. (ECONDE: )

A survey by market research group GfK on Tuesday showed
consumer morale remains at its highest level since May 2008
going into November on expectations of a continuing recovery,
bolstering hopes that improved domestic demand will take up much
of the slack if export growth runs out of steam. [ID:nLDE69P0ES]

Economic sentiment in the wider euro zone also remained
buoyant this month, improving against market expectations for a
flat reading, European Commission data showed on Thursday.
[nBRLSLE682]

Among German businesses, sentiment hit its highest level in
3-1/2 years in October and firms’ expectations also improved, a
survey showed last week, while the corporate outlook remained
bright.

German sporting goods company PUMA, (PUMG.DE: ) for example on
Tuesday hiked its sales outlook and posted bumper profits,
following in the footsteps of rivals Adidas (ADSGn.DE: ) and Nike
(NKE.N: ) to benefit from a global economic recovery.

PAINFUL REMINDER

Economists are watching retail sales and other consumer data
closely for evidence of a pick-up in spending, which
policymakers hope will lend increasing support to the economy
this year and next and partly compensate for easing export
growth.

Consumer spending increases, combined with surging exports,
powered the German economy to growth of 2.2 percent in the
April-June quarter, and so far economists see private
consumption rising by around 1 percent next year.

But that outlook could brighten given an increasingly sturdy
jobs market, which passed a milestone in October by falling
below 3 million in unadjusted terms, hitting its lowest level in
18 years in a development that seems likely to reassure
consumers.

Economy Minister Rainer Bruederle has said domestic demand
would make up three quarters of growth next year, but that would
require the sustained gains in retail sales that economists now
see as being in doubt.

“Today’s numbers are a painful reminder that another strong
growth performance in the third quarter is on a razor’s edge,”
said Carsten Brzeski from ING Financial Markets.

Adding to the mixed picture, another report released by the
statistics office on Friday showed Germans were kept their purse
strings closed slightly tighter in the first half of this year.

Germans saved 11.5 percent of their income in the first six
months of 2010, in seasonally adjusted terms, compared to 11.2
percent in the same period a year earlier — a sign less income
was available for spending.

Some positives did emerge from the retail sales data.

On an annual basis, sales were up 0.4 percent in real terms.
In nominal terms, sales fell 2.4 percent on the month but were
up 1.6 percent on the year, yielding a 2.1 percent increase in
the year through September.

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

(Additional reporting by Annika Breidthardt; Editing by John
Stonestreet)

UPDATE 2-German retail sales dip, take edge off growth story