UPDATE 2-Germans spend, factories hum in robust recovery

* Retail sales rise of 2.3 pct surpasses all forecasts

* Gain is biggest monthly rise since January 2008

* PMI survey shows manufacturing sector accelerates in Nov

* Domestic demand recovering strongly, say analysts

(Adds manufacturing PMI data, economist comment)

By Paul Carrel

BERLIN, Dec 1 (BestGrowthStock) – German retail sales rose strongly
in October and the manufacturing sector accelerated last month,
suggesting Europe’s dominant economy has enough momentum going
into next year to ride out the debt crisis engulfing much of the
region.

Retail sales rose by 2.3 percent, the Federal Statistics
Office said, recording their biggest monthly gain since January
2008 and surpassing all forecasts in a Reuters poll of
economists. (ECONDE: )

The figures added to other data pointing to a robust upswing
in Germany. A survey also released on Wednesday showed the
manufacturing sector accelerated in November, spurring the
fastest job creation since March 2008. [ID:nSLAUME6JC]

“We’re quite positive about next year,” said Juergen Michels
at Citigroup. “We’re expecting private consumption to rise by
more than two percent. That would be the strongest in 10 years.”

“The upturn is not only being driven by export growth but
rather it’s being supported by a strong recovery of domestic
demand,” he added.

German business morale improved in November to its strongest
level since 1991, and unemployment fell in November for a 16th
straight month. On Tuesday, German steelmaker ThyssenKrupp
(TKAG.DE: ) gave an upbeat outlook for 2011. [ID:nLDE6AT1KC]

German firms are profiting from growth in emerging markets.

Germany’s strong recovery has helped pull the euro zone to
improved growth in recent quarters, but there are concerns it
may be leaving other struggling economies behind — particularly
those on the euro zone periphery fighting a debt crisis.

LASTING UPTURN

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

“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.”

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 percent from
2009, and spending to grow by 1 percent 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 percent to almost 6 billion euros.

The pick-up is also filtering through at more traditional
retailers.

Germany’s Metro (MEOG.DE: ), the world’s No. 4 retailer,
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.”

(Additional reporting by Erik Kirschbaum and Rene Wagner;
editing by Patrick Graham, John Stonestreet)

UPDATE 2-Germans spend, factories hum in robust recovery