German retail sales fell for a second month in March as inflation accelerated, eroding household purchasing power.

Sales, adjusted for inflation and seasonal swings, decreased 2.1 percent from February, when they fell 0.4 percent, the Federal Statistics Office in Wiesbaden said on Saturday. Economists forecast a 0.2 percent gain, according to the median of 18 estimates in a Bloomberg News survey. From a year earlier, sales declined 3.5 percent.
German inflation quickened to 2.6 percent in April, the fastest pace in 2 1/2 years, driven by surging oil prices. At the same time, unemployment dropped to a 19-year low as companies stepped up production to meet export orders. The government expects Europe’s largest economy to expand 2.6 percent this year after record growth of 3.6 percent in 2010.
“A negative reading in March isn’t unusual if Easter falls in April,” said Ulrike Rondorf, an economist at Commerzbank AG in Frankfurt. “In the first quarter, retail sales still exceed the fourth quarter average by 0.2 percent.”
Consumer-price developments are casting a “slight shadow” on an otherwise “positive” economic outlook, the Economy Ministry said on April 19.
German factory orders and industrial production rose more than economists predicted in February.
-------------‘Negative repercussions’
“Private consumption will markedly recover this year and also grow in 2012,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “However, while the labor market is having a positive impact on private spending, we also have negative repercussions from the surge in inflation.”
Consumer confidence will decline for a second month in May as households grapple with higher food and energy prices, Nuremberg-based market-research firm GfK AG said this week. Business confidence fell for a second month in April after oil prices rose to the highest in more than two years.
“Inflation is certainly the major risk for private consumption in Germany; consumers in particular are sensitive to price increases at the pump,” said Mario Gruppe, an economist at NordLB in Hanover, Germany. “However, a negative reading is not the end of the world as we’ll see a robust economic upswing despite looming inflation risks.”
(Source: Bloomberg)