German retail sales post surprise rise in May

Berlin - German retail sales unexpectedly rose for the third consecutive month in May, the nation's statistics office said Wednesday. Adjusted for inflation and seasonal swings and excluding car sales, retail sales in Europe's biggest economy rose 0.4 per cent month-on-month in May as dwindling inflation and hopes that the recession might be easing encouraged German consumers to open up their wallets. 'Private consumption in the second quarter is bound to surprise many pessimists,' said ING Bank economist Carsten Brzeski. Analysts had forecast that retail sales would come in flat in May after posting a 0.5-per-cent increase in April. However, year-on-year retail sales fell 2.9 per cent in May. But with car sales buoyed by a bonus scheme for consumers scrapping old model vehicles in favour of more environmentally sound vehicles, the May retail sales data points to private consumption having turned in a solid performance in recent months. As a result, private consumption could help to compensate for the dramatic slump in German exports following the implosion of world trade this year. The publication of the latest retail data also follows the release of figures pointing to the German labour market managing to weather the global economic storm better than forecast. While the Federal Labour Agency said Tuesday that seasonally adjusted unemployment climbed by 31,000 this month, in the politically important unadjusted terms the numbers out of work fell by 48,000. Analysts had forecast a 45,000 rise in the seasonally adjusted unemployment, which reflects overall trends in the job market. But analysts also say that the prospects of layoffs mounting in Germany towards the end of the year as the global economic downturn catches up with the nation's labour market could cast a shadow over private consumption in the coming months. Indeed, economic forecasters are expecting the German economy to contract by a dramatic 6 per cent plus this year.