German consumers fuel 2.3% rise in retail sales

German retailers boosted their spending by 2.3% last year, providing further evidence that they are fuelling the country’s economic expansion as much as exporters.

Over last year German exporters boosted their trade by a net 1.2%, and the economy as a whole expanded by 3.6% – the greatest growth since reunification.

Last year’s increase in retail spending, in nominal terms, was mirrored by a 1.2% increase in real terms.

Retail sales fell in December, however, as snow hindered shoppers.

Rob Smith, manager of Baring Asset Management’s German Growth Trust, said: “Germany is more than an export story; it is now a domestic demand story too. In contrast to many of the peripheral European countries, real wage growth in Germany has been low in recent years, and consumer spending growth has been modest at best.

“This sacrifice has helped to improve the competitiveness of German companies, and as these companies begin to share their increased profitability with workers, spending has started to move higher again.”

Smith said Germany had entered a positive cycle where consumer spending boosts growth in profits, which is then re-cycled, in part, to consumers through wage growth.

Separately the European Union’s statistics office calculated inflation for the Eurozone, of which Germany is part, is expected to rise from 2.2% in December to 2.4% in December.

The estimate is based on the Monetary Union Index of Consumer Prices which combines preliminary price information of member states, plus data on energy prices.

David Walker

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