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Last Updated: Monday, 31 July 2006, 14:37 GMT 15:37 UK
Germany in World Cup retail boost
Gesundbrunnen shopping centre in Berlin
Gesundbrunnen in Berlin extended its World Cup shopping hours
Spending by World Cup football fans, helped by longer opening hours, lifted German retail sales during June.

Retail sales rose by 1.9% in the month in real, seasonally adjusted terms, Federal Statistics Office data showed.

The rise was the biggest since January and came after May's 0.4% fall. But the year-on-year figure showed a 0.4% drop.

Food and drink retailers, as well as clothing retailers, performed best in June, according to data published separately by the Bundesbank.

'Solid increase'

"Retail sales have performed unexpectedly strongly in June," said Alexander Koch at HVB.

"Additional spending during the soccer World Cup apparently has helped to get a solid increase in retail sales at the end of the second quarter."

German economic growth has been held back in recent years by sluggish private consumption - which accounts for 60% of the country's gross domestic product - and by high unemployment.

The German government hopes the economy, Europe's largest, is finally emerging from years of stagnation.

Sales tax rise

During the football World Cup in the months of June and July many German stores stayed open longer than normal, and overseas visitors flocked into Germany and spent heavily.

However, there are fears that any continued growth in retail spending could be driven by an impending sales tax increase, rather than any true recovery.

A three percentage point sales tax rise comes into effect at the start of next year, and many Germans are now looking to buy "big ticket" items they need before the new 19% rate kicks in.

Last week, the GfK market research institute said that the sales tax effect may have resulted in its forward-looking consumer sentiment gauge rising to a five-year high.

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