March 3, 2015 / 9:03 AM / in 4 years

German retail sales surge at fastest pace in seven years

A shopper walks through a Karstadt department store in Hamburg-Billstedt October 24, 2014. REUTERS/Fabian Bimmer

BERLIN (Reuters) - German retail sales jumped by the largest amount in seven years in January, data from the Federal Statistics Office showed on Tuesday, fuelling expectations that private consumption will propel growth in Europe’s largest economy this year.

Retail sales, a notoriously volatile indicator, climbed by 2.9 percent on the month in real terms, its sharpest increase since Jan. 2008. That was stronger than the 0.4 percent forecast in a Reuters poll and exceeded even the highest estimate for a 1.1 percent gain.

The data helped push European shares higher.

“Cheap oil, healthy income gains, low interest rates and fading risks combined to make a very strong start to the year for German retailers,” said Christian Schulz, senior economist at Berenberg Bank.

“Private consumption looks set to be a major growth driver in 2015 and, at this rate, would put a severe upside risk to our forecast of gross domestic product (GDP) growth of merely 0.3 percent quarter-on-quarter in Q1,” he added.

On the year, retail sales leapt by 5.3 percent on the year in real terms, their biggest increase since June 2010, as shoppers spent more online and in shops on items such as food, books, jewellery and cosmetic products.

That was far stronger than the Reuters forecast for a 2.7 percent rise and beat even the highest estimate for a 4.0 percent increase.

German consumer morale is at its highest level in more than 13 years as shoppers benefit from record employment and higher pay. Negotiated wages including special payments climbed by 3.2 percent last year, the biggest increase since the statistics were first compiled in 2010, and Germany’s biggest trade union, IG Metall, has secured an inflation-busting 3.4 percent hike.

Reporting by Michelle Martin; Editing by Madeline Chambers

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