German retail sales unexpectedly rose year-on-year in June, according to preliminary figures that prompted cautious forecasts of a gradual pick-up in private consumption which has been acting as a drag on the economy. Retail sales rose by 1.0 percent in real terms year-on-year and by 1.8 percent month-on-month, beating analysts' forecasts, data from the Federal Statistics Office showed on Friday. The mid-range forecast of economists polled by was for retail sales to fall by 2.4 percent year-on-year and rise by 0.7 percent month-on-month . Rainer Sartorius, an economist at HSBC Trinkaus & Burkhardt, said the data could mean retail sales contributed to economic growth in the April-June period.
"But one has to be careful, the figures are subject to revision and I wouldn't conclude on this basis that we've got an upturn in consumer spending," he added. "We're seeing the first cautious signs of stabilisation." Germany's gradual acceleration of economic growth this year has been driven by rising exports while domestic demand has stagnated due to high unemployment and consumer fears about the impact of government welfare cuts on their incomes. According to the data, based on figures from six German states accounting for 81 percent of the total goods sold, retail sales rose by 1.3 percent on the year in nominal terms and by 1.8 percent from May, the statistics office reported. The statistics office said June had two more business days this year than it did last year. The latest survey from market research group GfK that said German consumer sentiment was set to drop in August as heavily publicised cost-cutting plans at big companies stoked worries about income and dampened enthusiasm for spending.
A breakdown of the retail sales data showed that June sales of groceries, beverages and tobacco products had risen 0.1 percent in real terms from June 2003, and non-groceries by 1.7 percent. Sales of pharmaceutical products, household appliances and mail order items showed the biggest gains from a year ago. The annual rise was only the second this year, and followed 6.1 percent drop in sales in May, the office said. Sales in the first six months of the year fell by 1.4 percent in real terms and by 1.5 percent in nominal terms compared with a year earlier.///