Some slight easing in the downward process is Germany is now taking place, the recent data are too consistent to ignore on this front. The IFO reading was not as weak as might have been expected, the GFK consumer confidence reading remained stationary, unemployment continued to fall on a seasonally adjusted basis,and the January retail sales data and February PMI reading indicate an expansion in German retail sales for the first time in several months. Of course how long this will last, and how important the phenomenon will prove to be, is very hard to say at this point. Looking at the general economic environment I wouldn't be betting on any kind of very strong upswing, but the numbers are interesting, and I wouldn't be surprised at all to see some slight recovery in the export situation in January when we get the data. An Eastern Europe effect perhaps? Certainly several economies are still accelerating there, almost to overheating.
Now for the retail sales data.
According to provisional results released by the Federal Statistical Office turnover in the German retail trade was up by 2.7% in nominal terms and 0.6% in real terms in January 2008 over January 2007. When adjusted for calendar and seasonal variations the January turnover was in 1.9% higher in nominal terms and 1.6% in real terms over December.
Now this is not an earth shattering change, but it is significant. If we add to these results the latest reading on the Bloomberg retail sales purchasing managers index, which rose to 52.1 in Feb from 44.2 in Jan (according to data released yesterday by NTC economics), then obviously we can see that the sales climate has improved somewhat. In fact this was the first time in almost a year that German retailers anticipated that future sales performance would exceed plans, while the retail sales rose for the first time in five months. The last time the retail PMI registered an expansion was in September 2007.
As I say at the start of this post, it is very hard to decide how to read all of this, but I imagine things will become clearer as the days pass. The retail PMI report also recorded an increases in France to 58.8 in February, up from January’s 56.2 while retail sales in Italy where slighly better in February at 43.8 from the 43.0 level recorded in January, but still contracting, since any reading below 50 indicates contraction.
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