German retail sales rise

January 15, 2002 Posted: 1533 GMT

LONDON (Reuters) -- German retail sales grew by a surprising 1.6 percent in November as inflation continued to slow and consumers confidence strengthened.

However, sales declined on a year-on-year basis by 0.4 percent, indicating a recovery in the retail industry of Europe's largest economy may not be sustained.

"You've had a bounce on the month ... [but] retail sales over the past few months have been pretty weak," James Stewart, chief economist at Weavering Capital, told CNN.

Stewart said retail sales in coming months could be depressed by growing unemployment and a weaker manufacturing sector.

While German inflation is running at an annual rate of just 1.5 percent – due mainly to lower fuel and food prices -- Germany's jobless rate is growing, reaching 9.5 percent in December.

Unemployment is expected to continue rising in Germany, as industries restructure to deal with global economic downturn. Economists believe Germany's problems are hampering growth throughout the eurozone.

The European Central Bank is calling for economic growth of between 2 and 2.5 percent by the fourth quarter of 2001.

"It's difficult to share [ECB President Wim] Duisenberg's optimism," Stewart said. "It could take a little longer for the eurozone economy to pick up."

Another indication of Europe's economic health comes on Thursday, when UK retails sales figures for December will be released. Many analysts expect those numbers to be strong. UK sales have been running at an year-on-year growth rate of  6 to 7 percent.

On Tuesday, Britain's largest supermarket chain Tesco said like-for-like sales rose 6.8 percent – minus the impact of lower fuel prices -- for the seven weeks ended January 5.

Despite the lower than expected holiday sales, Tesco said it was still on track to meet its profit target of £1.22 billion ($1.77 billion) for the year ending February 23. Tesco (TSCO) shares fell 0.3 percent in midday trading in Lodnon.

That was at the low end of market expectations, and below sales figures at rival UK supermarket Sainsbury, which reported 6.8 percent growth, and Morrison, which saw sales rise 7.2 percent during the Christmas period.

Safeway, the UK's fourth largest food retailer, said its like-for-like sales rose 4.1 percent in the 12 weeks ended January 5. Analysts had forecasted an increase of 4 percent to 5 percent.

Meanwhile, Sweden's Hennes & Mauritz – the world's largest fashion retailers – said its December sales were 10 percent higher from the same time last year, below market expectations of about 20 percent. H&M said December were weak because of low stocks on hand. It shares were flat in midday trading in Stockholm.