German retail sales unexpectedly jump, point to strong Q1

BERLIN, March 31 Mon Mar 31, 2014 3:24am EDT

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BERLIN, March 31 (Reuters) - German retail sales unexpectedly jumped in February, data showed on Monday, marking the second consecutive monthly increase and pointing to a strong rise for the quarter that would boost overall growth in Europe's largest economy.

Data from the Federal Statistics Office showed retail sales rose 1.3 percent in real terms on the month, beating even the highest forecast in a Reuters poll of economists for a gain of 0.8 percent. The consensus forecast was for a 0.5 percent fall.

"The figures were much stronger than expected, a further signal for strong growth in the first quarter," said economist Holger Sandte at Nordea. "Consumption should be a central pillar of support of growth this year."

The indicator for retail sales is notoriously volatile, however, and the figure for January was revised down to a rise of 1.7 percent from an originally reported 2.5 percent. For a table of the data, click on

Christian Schulz at Berenberg bank said the data put sales on track for a rise of 1.6 percent in the first quarter.

"That would be the biggest increase in retail sales since Q4 2009, when the post-Lehman recovery started in earnest," he said. "Then, as now, returning confidence combined with strong fundamentals and low inflation to deliver a strong rebound after a period of weakness."

Wage negotiations promised generous pay increases for households, he added, which will likely boost consumption.

Market researcher GfK has said workers in pay negotiations were likely to get increases of 3 percent or more this year. Trade union Verdi heads into the third round of negotiations on wage rises for public sector workers on Monday. It wants a total increase equivalent to around 6.7 percent.

Berlin has relied on domestic demand to bolster growth over the past year as a weak global outlook and the euro zone crisis weighed on exports, traditionally the driver of the German economy.

But uncertainty also dampened spending at home last year, and the economy grew just 0.4 percent. Economists and the government expect expansion of around 1.8 percent in 2014, thanks to robust private consumption and a pickup in investment.

A GfK survey last week showed German consumer morale held steady going into April as shoppers were more upbeat about the economic outlook, but their mood could worsen if the Crimea crisis spreads and leads to tougher sanctions from the West.

GfK expects private consumption spending will increase by 1.5 percent in real terms this year. (Additional reporting by Rene Wagner; Editing by Stephen Brown)

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