German economy still seeks help from shoppers

FRANKFURT, Sept 28, 2007 (AFP) - German retail sales plummeted in August, official data showed Friday, another sign that a long-awaited contribution to the eurozone's biggest economy was still some way off.

Retail sales fell by 1.4 percent from July, and by 2.2 percent from August 2006, preliminary data from the national statistics office Destatis showed.

Analysts had expected annualised sales to decrease by 1.4 percent, and the figures backed up a survey published Tuesday by the Ifo research institute that showed business sentiment among retailers falling sharply.

"There is not yet any indication for the generally expected strengthening of private consumption," Commerzbank analyst Matthias Rubisch said in a research note.

Germany's slowing economy is heavily reliant on exports, and the consumption pillar has traditionally provided less support owing to a German inclination to save rather than spend.

Almost all retail categories showed significant drops over the year, and the losses hit both small and large retail outlets.

Among non-food products, only sales of pharmaceuticals and cosmetics edged higher, while new clothes sat on the shelves owing to the country's rainy summer.

Rubisch nonetheless forecast that lower unemployment along with higher wages would boost disposible income and that as a result, "the figures for retail sales will probably be better in the coming months."

But, he warned: "The upswing will not be a strong as many analysts are expecting."

That, along with a likely increase in savings to provide for old age, meant that "stronger private consumption will not stop the economy losing further steam in 2008."