Page last updated at 07:29 GMT, Monday, 3 August 2009 08:29 UK

Retail sales fall back in Germany

A shopping arcade in Hamburg, Germany
Rising unemployment will dent sales further, analysts say

German retail sales fell by 1.8% in June from a month earlier, despite many analysts expecting a slight rise.

The Federal Statistics Office figures will dent hopes that consumer spending could help support Europe's largest economy, observers say.

Sales in June were also down 1.6% from the same month last year.

Germany is facing its worst economic downturn since World War II and the economy is expected to contract by about 6% this year.

Unemployment has risen by only 300,000 since the global financial and economic crisis began - largely due to firms shortening working hours, which has reduced job losses.

But this situation is unlikely to last, according to Klaus Schruefer, an economist at SEB.

"In the medium-term, retail sales should be burdened further when short-time work gives way to job losses," he said. "Then a lot of workers will have less in their pockets."

Last week, official figures showed that German consumer prices fell for the first time in 22 years in July.

The decline was largely caused by falls in energy prices, which peaked in summer 2008.

Prior to the retail sales figures, there had been tentative signs that the economy was picking up.

Confidence among consumers and companies had risen, and the decline in exports had begun to ease.

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