German Retail Sales Decline as Weak Economy Weighs on Sentiment

German retail sales dropped more than economists expected in December as uncertainty about the economic outlook weighed on consumer confidence.

Sales, adjusted for inflation and seasonal swings, plunged 1.7 percent from November, when they rose a revised 0.6 percent, the Federal Statistics Office in Wiesbaden said today. Economists forecast a 0.1 percent decline, according to the median of 26 estimates in a Bloomberg News survey. Sales fell 4.7 percent from a year earlier. In 2012, retail sales dropped 0.3 percent.

German unemployment may have increased for a 10th month in January as a recession in the euro area, the country’s biggest export market, weighed on foreign sales and company investment. Consumer confidence declined at the end of last year and the economy, Europe’s largest, probably contracted 0.5 percent in the fourth quarter.

“December data are a setback, but confidence improved since then and declining uncertainty about the debt crisis is feeding into consumer sentiment,” said Gerd Hassel, an economist at BHF Bank AG in Frankfurt. “Disposable income will rise this year amid stronger wage deals and as a result, private consumption should pick up. We’re rather optimistic.”

German business confidence rose for a third month in January and the Bundesbank said last week there are signs that the economy is already rebounding from its slump. Sentiment among investors jumped to the highest since May 2010 this month and a gauge of activity in service industries rose to a 19-month high.