German retail sales posted a small decline in May, official data showed on Friday, but economists said spending nevertheless looked on track for a solid second quarter.
Sales fell 0.1 percent in real terms from the previous month on a seasonally-adjusted basis after a gain of 0.5 percent in April, according to a Bundesbank measure that includes vehicles and gas stations.
A narrower gauge published earlier by the Federal Statistics Office showed a decline of 1.8 percent, wrongfooting economists in a Reuters poll whose mid-range forecast predicted a 0.1 percent increase.
"Although the May spending report is somewhat disappointing, it suggests nonetheless a rebound in household consumption in the second quarter after a poor first quarter," said Maryse Pogodzinski at J.P. Morgan in Paris.
"Looking ahead, the ongoing decline in unemployment should support household consumption in the coming months, as suggested by recent consumer confidence data," she added. Germany's jobless total fell for a 15th straight month in June, taking the unemployment rate down to the lowest level in more than 12 years, data showed on Thursday. The improvement on the labour market has been a key factor in boosting consumer confidence and economists expect household demand to help support 2007 growth that could match last year's six-year peak of 2.8 percent.
KarstadtQuelle said earlier this month it was on track to meet or beat its targets for all divisions of the German tourism, department store and mail order group in 2007.
Sandra Petcov at Lehman Brothers in London predicted second-quarter gross domestic product (GDP) growth would match a gain of 0.5 percent in the January-March period as a recovery in private consumption is offset by slowing investment.
A pickup in consumer spending after years of sluggishness would provide more balance for an economy that has relied heavily on surging foreign demand for goods such as chemicals, cars and machinery in past years. So far, however, consumption has been mixed, clouded by January 1's three-point increase in sales tax to 19 percent.
"At the moment it looks like we're in a transition phase between the VAT bump and rising private consumption in the second half of the year," said Sebastian Wanke of DekaBank. "The pickup in consumer spending is probably going to take longer than many think. It may not really get going until 2008."
Compared with the same month a year earlier, retail sales fell 2.6 percent in May according to the Bundesbank measure and were down 3.7 percent on the statistics office gauge. Germany's volatile monthly retail data are typically revised about two weeks after the release of the preliminary figures.