(Adds economist, detail, context)
By Michelle Martin
BERLIN, July 31 German unemployment dropped more
than expected in July and retail sales climbed in June, data
showed on Thursday, spelling good news for private consumption
which is expected to drive growth in Europe's largest economy
Seasonally adjusted data from the Labour Office showed the
number of people out of work decreased by 12,000 to 2.898
million. The consensus forecast in a Reuters poll had been for a
drop of 5,000.
"The fundamentals for German household spending are very
strong. Unemployment is at long-term lows, employment at highs.
Wages are rising, inflation is very low and the uncertainty of
the euro crisis has faded," said Christian Schulz, senior
economist at Berenberg Bank.
German consumer morale rose to its highest level in more
than 7-1/2 years heading into August as shoppers became more
upbeat about their future income prospects than at any point
since 1991, helped by a robust labour market and low inflation,
which currently stands at just 0.8 percent in Germany.
The jobless rate was steady at 6.7 percent, setting Germany
worlds apart from euro zone peers like Greece and Spain, where
around one in four people continue to be unemployed.
But some companies are still slashing jobs in Germany. Firms
ranging from lighting maker Osram Licht AG and solar
company SMA Solar to Commerzbank and
industrial services group Bilfinger have all announced
they will be trimming their workforces.
Data from the statistics office showed German retail sales
rose by 1.3 percent in June in real terms on the month - their
strongest rise since January and potentially a result of Germans
hitting the shops at the start of the soccer World Cup.
Schulz said retail sales had risen by 1.4 percent in the
first half of 2014 compared with the same period earlier,
suggesting they could grow by 2.8 percent this year.
"That is a very healthy clip which should make consumption a
key driver of overall demand," he said.
The German economy grew at its fastest rate in three years
in early 2014 but that was largely due to mild weather so it is
expected to slow or even stagnate in the second quarter before
picking up again in the third.
Other recent data has pointed to a slowdown, with exports,
industrial orders and production all falling. Germany's VDMA
engineering body has also slashed its output forecast for this
year. Surveys have shown business and investor morale weakening
but consumers remain a source of support.
(Editing by Madeline Chambers)