German Retail Sales Unexpectedly Fall After Unemployment Rises

By Christian Vits and Jana Randow

April 1 (Bloomberg) -- Retail sales in Germany, the euro area’s largest economy, unexpectedly fell in February after unemployment rose, fueling fears about job security.

Sales, adjusted for inflation and seasonal swings, decreased 0.2 percent from January, when they declined 0.9 percent, the Federal Statistics Office in Wiesbaden said today. Economists forecast a gain of 0.3 percent, the median of 26 estimates in a Bloomberg News survey showed.

Companies have stepped up efforts to reduce production and cut jobs as the worst global slump since World War II erodes demand. German business confidence fell to the lowest level in more than 26 years in March and unemployment increased for a fifth straight month.

“The outlook for the labor market is bleak, damping consumers’ mood to spend,” said Alexander Koch, an economist at UniCredit Markets & Investment Banking in Munich. “The positive effect on consumption due to falling inflation rates is offset by job fears.”

German retail sales will fall as much as 1 percent this year, the HDE retailers’ lobby group said this week. Sales will be little changed in the first half and decline in the second six months of the year, HDE said.

Inflation slowed to the weakest pace in almost 10 years in March as oil prices dropped 50 percent over the past year. Still, German consumer confidence declined for the first time in seven months as workers worried about keeping their jobs amid the worst recession in six decades.

‘Considerable Decline’

The latest indicators suggest “that the decline in gross domestic product in the first quarter of 2009 could be even stronger than in the last quarter of 2008,” when the economy contracted 2.1 percent, Bundesbank President Axel Weber said this week. “That’s why we have to expect a considerable decline in GDP in 2009 overall.”

Villeroy & Boch AG, the German porcelain maker founded in 1748, expects to post an operating loss this year on “a substantial decline in sales,” Chief Executive Officer Frank Goering said yesterday. Hugo Boss AG, the nation’s largest clothes maker, said on March 26 it sees a risk of “increasing consumer restraint.”

Hawesko Holding AG, Germany’s biggest wine seller, will report lower first-quarter sales because of a drop in demand for expensive vintages in its mail-order business, the company said on March 30. German auto-parts company ElringKlinger AG expects the first decline in sales in at least a decade as orders slump. Chief Executive Officer Stefan Wolf said this week he had “never seen anything like this.”

To contact the reporters on this story: Christian Vits in Frankfurt cvits@bloomberg.net; Jana Randow in Frankfurt jrandow@bloomberg.net.