Shock jump in German retail sales

http://news.bbc.co.uk/go/rss/-/1/hi/business/6316157.stm

Version 0 of 1.

Surging household goods, clothing and building material sales led to a sharper-than-expected rise in German retail sales in December.

Retail turnover jumped 2.4% in the month preliminary official figures show, against forecasts of a 1.3% rise.

Analysts said spending had likely been lifted by Germans snapping up items ahead of a VAT increase this month.

Experts predict that raising VAT on purchases to 19% will crimp spending in the first three months of the year.

"The good December figures are not surprising because it is the month which was affected most by spending brought forward before January's sales tax rise," said Matthias Rubisch, a Commerzbank economist.

Long-term view

However, while sales grew month-on-month, turnover actually declined 0.2% when compared with December 2005.

"For 2006 as a whole, the figures are rather disappointing," said Uwe Angenendt, of BHF Bank.

"This is not a development that points to a strong recovery in private consumption."

In recent months experts have warned that the current recovery underway in the country is a two-speed one, with firms faring well, while some households struggle.

The problem facing many Germans is that even though demand for exports has helped to drive production and corporate profits, wage growth has been limited. As a result, consumer spending has failed to pick up as quickly.

Looking ahead, economists remain cautious about the economic outlook for the country amid concerns that an increase in German sales taxes and a global economic slowdown may hamper expansion.