BER­LIN

The Pak Banker - - BUSINESS -

Ger­man re­tail sales recorded their strong­est first-half in­crease in at least 20 years, data showed on Fri­day, strength­en­ing ex­pec­ta­tions that pri­vate con­sump­tion will be a ma­jor growth driver for Europe's largest econ­omy this year.

The 2.5 per cent gain in shop­ping ac­tiv­ity in real terms from Jan­uary to June was the largest rise on record, data from the Fed­eral Sta­tis­tics Of­fice showed on Fri­day. An of­fi­cial said it was the high­est first- half in­crease since the of­fice be­gan re­leas­ing that data in 1994.

An­nual re­tail sales were also en­cour­ag­ing. Shop­ping ac­tiv­ity soared by 5.1 per cent on an an­nual ba­sis as Ger­mans spent more on tex­tiles, cos­met­ics, medicines and other items like books and jew­ellery.

An­a­lysts noted the up­turn has been driven by cash- spend­ing, rather than bor­row­ing, as Ger­mans crack open their piggy banks to spend more on con­sumer goods. "Things have hardly ever been go­ing bet­ter for Ger­mans than right now," Beren­berg economist Hol­ger Sch­mied­ing said, adding that record- high em­ploy­ment, sta­ble prices, ris­ing wages and stock mar­ket prof­its made Ger­mans more will­ing to spend.

"It's es­pe­cially en­cour­ag­ing that this in­crease in spend­ing is not be­ing driven by bor­row­ing," he said, not­ing cash spend­ing is be­hind the up­turn. "As a re­sult, I think pri­vate con­sump­tion can con­tinue grow­ing solidly with­out any risks on the hori­zon." The strong first- half re­tail sales bode well for house­hold spend- ing, com­bined with other data show­ing un­em­ploy­ment at record- low lev­els and morale among Ger­man shop­pers high lev­els.

In ad­di­tion, cheap oil is free­ing up some of con­sumers' cash for other pur­chases and big­ger pay­checks also make an in­crease in pri­vate con­sump­tion likely. "The first half of the year ex­ceeded our ex­pec­ta­tions," said Ste­fan Her­tel, an of­fi­cial at Ger­many's HDE re­tail as­so­ci­a­tion, adding that shop­pers spent more thanks to the ro­bust labour mar­ket and de­spite in­ter­na­tional crises.

"There's been a lot of talk in Ger­many about all the crises abroad, but so far it's not hit­ting any­one's wal­let." On a monthly ba­sis, re­tail sales - a no­to­ri­ously volatile in­di­ca­tor that is of­ten sub­ject to large re­vi­sions - dropped by 2.3 per cent in real terms, the data showed. That was the big­gest drop since the end of 2013 and was far be­low the con­sen­sus forecast for a 0.3 per cent rise. Monthly re­tail fig­ures for May were slightly re­vised down to a gain of 0.4 per cent from a pre­vi­ously re­ported rise of 0.5 per cent.

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