German retail sales fell more sharply than expected in August to their lowest level since May, the Federal Statistical Office reported on Friday.After rising 4.3% over June and July, sales declined 2.9% on the month in August, but were still 2.2% higher on the year.Disaggregating the main figure, food, drink and tobacco sales were up 2.2% in real terms y/y, while non-food sales increased 2.5% over the same period.Taking July and August together, sales were still 0.8% higher than in 2Q, which in turn was down 0.4% compared to the previous period.With economic activity set to slow further in the near, households are likely to reduce their non-essential purchases.However, the continued strength of the labour market could partially offset the effects of lowered economic expectations. A recent European Commission survey showed that Germans’ likelihood of making major purchases now and in the near future both remain above their respective averages.Nevertheless, an increase in thrift among shoppers was blamed for the fall in the German retail PMI in September to 53.9, which brought the average for 3Q to its lowest level since the third quarter of 2010.An Ifo institute survey showed a modest rebound in retail morale this month, with both their current business situation and their prospects for the coming year viewed more positively.The ongoing debt crisis, however, could soon change that.Consumers willingness to spend suffered a moderate decline in September, the GfK Group said. While the indicator remains at “an extremely good level,” GfK warned that “trust of consumers in their government’s ability has seriously suffered” as a resolution to the crisis remains elusive.“This loss of trust is now clearly also having an impact on consumption and is increasing anxiety,”
By
M.Zohaib Gadit
Forex Trading Consultant
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