German Retail Sales Fall for Third Month as Unemployment Rises

German retail sales unexpectedly fell for a third month in April as unemployment rose, suggesting the recovery in Europe’s largest economy is struggling to take hold.

Sales, adjusted for inflation and seasonal swings, dropped 0.4 percent from March, when they fell a revised 0.1 percent, the Federal Statistics Office in Wiesbaden said today. Economists had forecast an increase of 0.2 percent, according to the median of 25 estimates in a Bloomberg News survey. From a year earlier, sales increased 1.8 percent.

German unemployment rose more than economists forecast in May, even as it remained near a two-decade low, signaling six-straight quarters of recession in the euro-area are affecting the domestic economy. Still, business confidence rose this month for the first time since February and consumer confidence is set to climb to the highest since 2007 in June, according to market researcher GfK AG.

“After a host of positive news recently from the German consumer, the moderate decline in retail sales in April makes for a slightly disappointing start to the second quarter,” said Christian Schulz, an economist at Berenberg Bank in London. “The fundamentals for consumption in Germany remain strong. Unemployment and inflation are very low, and real wages are rising thanks to more generous wage deals between unions and employers.”

Household spending rose 0.8 percent in the first quarter, according to a breakdown of first-quarter gross domestic product released on May 24. The Bundesbank, which in December predicted growth of 0.4 percent this year and 1.9 percent in 2014, will publish new forecasts next month.

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