German June Retail Sales Unexpectedly Drop as Oil Costs Surge
bloomberg.com
July 29 (Bloomberg) -- Retail sales in Germany, Europe's largest economy, unexpectedly declined in June as oil prices soared and unemployment held near a post-World War II high.
Sales, adjusted for inflation and seasonal swings, fell 0.3 percent from May, when they rose 1.8 percent, the Federal Statistics Office in Wiesbaden said today. Economists expected sales to rise 0.2 percent in June, the median of 12 forecasts in a Bloomberg survey showed. From a year ago, sales rose 1.9 percent.
``It's oil,'' said Sylvain Broyer, an economist at Ixis CIB in Frankfurt. ``People are having to pay more at the pump and that's depressing retail sales. Unemployment has fallen a little but we won't see a significant turnaround in the labor market till next year.''
German households have struggled to raise spending as oil prices surge and companies including International Business Machines Corp. cut jobs, pushing unemployment to a postwar record of 12 percent in March. The jobless rate was 11.6 percent in July after 11.7 percent in June, the Labor Agency said yesterday.
Chancellor Gerhard Schroeder introduced tax cuts worth 6.5 billion euros ($8 billion) at the start of the year, hoping to boost spending and economic growth.
`Gaining Speed'
The number of Germans out of work fell by a seasonally adjusted 42,000 in July from June, its fourth monthly decline, adding to signs the economy is recovering from a second-quarter slowdown. Business confidence rose to a five-month high in July as the euro's 11 percent drop against the dollar this year aided exports, the Ifo institute said July 26.
``The economic recovery will probably gain speed in the second half,'' said Elwin de Groot, economist at Fortis Bank Nederland NV in Amsterdam. ``But it's hard to see positive growth for the year in retail sales. We could see a slightly positive figure.''
The HDE retailers' lobby said sales will decline in 2005, and market research company Gfk on July 27 cut its forecast for consumer spending growth this year to 0.2 percent from 0.4 percent after its gauge of consumer confidence declined for a fourth month. ``The oil price has risen and the uncertainty of consumers hasn't improved,'' Klaus Wuebbenhorst, chief executive of GfK, said in an interview.
While the euro's depreciation makes European products more attractive to overseas buyers, it magnifies the impact of higher dollar-denominated oil prices at home. Oil rose to a record $62.10 a barrel in New York on July 7 and cost $60.32 in electronic trading at 7:46 a.m. in Frankfurt.
Election, VAT
Puma AG, Europe's No. 2 sporting-goods maker, said July 27 second-quarter profit rose 13 percent on a 12 percent increase in revenue, driven by sales abroad. ``Everybody knows that European markets and particularly the big markets aren't doing particularly well,'' chief executive Jochen Zeitz said in an interview.
Schroeder brought forward national elections by a year, to Sept. 18, after a defeat in a state vote showed support for his economic policies is fading.
Ifo said optimism among retailers declined in July, partly on concern about the opposition Christian Democratic Union's plan to raise value-added sales tax. The CDU, which leads Schroeder's Social Democratic Party in opinion polls, says it will use the extra revenue from VAT to cut employers' non-wage labor costs and boost employment prospects.
``A VAT rise means that consumers will have less purchasing power and, as we have warned in the past, this is not a good way to boost the economy on its own,'' GfK's Wuebbenhorst said.
KarstadtQuelle AG, owner of the biggest department store in mainland Europe, on July 14 reduced its earnings forecast for this year by almost a third.
ECB Rates
To support investment and consumption, the European Central Bank will probably keep its main lending rate at a six-decade low of 2 percent for a 27th month on Aug. 4, a Bloomberg survey of economists showed.
Investors have abandoned expectations for a rate cut in 2005 as signs of an economic revival emerge, interest-rate futures trading shows. The implied rate on the December Euribor interest- rate future contract was at 2.16 percent yesterday, up from 1.96 percent June 22.
The contracts settle to the three-month euro area inter-bank offered rate for the euro, which has averaged 15 basis points more than the ECB's key rate since the currency's launch in 1999. The Euribor three-month money market rate was 2.11 percent.
In the first six months of the year, retail sales rose 0.9 percent compared with the same period a year earlier, the statistics office said. In May the office re-based its data and started using a bigger sample of retailers. |
