German Retail Sales Unexpectedly Drop in Sign of Uneven Recovery

German retail sales unexpectedly fell for a second month in July, signaling an uneven recovery in Europe’s largest economy.

Sales adjusted for inflation and seasonal swings dropped 1.4 percent from June, when they declined 0.8 percent, the Federal Statistics Office in Wiesbaden said today. Economists predicted an increase of 0.6 percent, according to the median of 27 estimates in a Bloomberg News survey. Sales climbed 2.3 percent from a year earlier.

Germany’s Bundesbank said this month that the economy will “normalize and stabilize” in the rest of the year after gross domestic product surged 0.7 percent last quarter. The expansion followed a stagnation in the first quarter when a colder-than-usual winter curbed output. Inflation in food prices, which climbed 5.7 percent in July from a year earlier, may have reduced spending, according to Christian Schulz, senior economist at Berenberg Bank in London.

“Higher food prices tend to lead to a bit of downward pressure on consumption,” Schulz said before the report. “Everything else looks positive. If you look at any business survey, there’s acceleration, not deceleration, of growth in Germany.”

German business confidence as measured by the Ifo institute rose to the highest level in 16 months in August, and the ZEW index of investor sentiment climbed to the strongest since March. While GfK SE (GFK)’s gauge of consumer confidence for September unexpectedly dropped, it remained near a six-year high. The nation’s jobless rate of 6.8 percent is near a two-decade low.

Chancellor Angela Merkel seeks a third term as Germany’s leader on Sept. 22 on the strength of shielding her country from the worst effects of the euro area’s debt crisis. Her Christian Democratic-led bloc has about 40 percent support, compared with 25 percent for the opposition Social Democrats led by Peer Steinbrueck, according to polls by Emnid.

To contact the reporter on this story: Paul Gordon in Frankfurt at pgordon6@bloomberg.net

To contact the editor responsible for this story: Fergal O’Brien at fobrien@bloomberg.net

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