Forex News – German retail sales drop in December but employment still strong

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Retail sales fell in Germany in the month of December, despite expectations for an increase but were still higher for the year as a whole as consumer sentiment was buoyed by a strong labour market.

Data released by Destatis on Tuesday show that retail sales fell 1.4 percent in December when adjusted for inflation. This was down from the previous month’s 0.9 percent decline. Expectations were for a 0.9 percent rise based on a Reuters survey.

In the whole of 2011, however, German retail sales were up 0.9% in real terms from 2010, the second successive year of rising sales after a 3.2% plunge in 2009 in the wake of the global financial crisis.

The data were disappointing considering that German consumer sentiment, as measured by German market research group GfK, showed earlier this month that Germans’ willingness to buy hit its highest level in January since December 2006.

Germany’s domestic demand is key to keeping the economy growing. Germany is the largest economy in the euro zone and has so far remained relatively unscathed from the economic downturn amid the region’s sovereign-debt crisis.

Much of the driver behind consumer confidence is a strong labour market. This is the main supporting pillar of the economy Today’s jobs data released after the retail sales report showed German unemployment dropped more than economists forecast to a fresh two-decade low in January.

The number of people out of work fell a seasonally adjusted 34,000 to 2.85 million Economists forecast a drop of 10,000. The adjusted unemployment rate slipped to 6.7 percent from 6.8 percent.