German Retail Sales April 2008

According to provisional results of the Federal Statistical Office turnover in the German retail trade in April was up by 1.5% in nominal terms and in down by 1.0% real terms over the corresponding month of the previous year. The number of days open for sale was 26 in April 2008 and 23 in April 2007. Basically Easter makes a bit of a mess of the April/March comparison, but there is no doubt that over the two months retail sales were down significantly over the same months in 2007.



When adjusted for calendar and seasonal variations, the April turnover was in nominal terms 1.3% and in real terms 1.7% smaller than that achieved in March. Compared with the corresponding period of the previous year, retail turnover was in the first four months 2008 in nominal terms 1.6% larger and in real terms 0.9% smaller than that in the first four months of 2007.

What is clear is that retail sales are falling in Germany, and that they have been since 2006. The index of 2006 was 103.8, that for 2007 was 101.5 (a decline year on year of 2.2%), while in April 2008 the index stood at 98.7.




What it might well be worth considering given the declining working age population issue which is soon to lock in in Germany is whether we may not have reached a high point of the retail sales index in 2006 which will simply not be achieved again, in constant price terms. After all, the export driven boom of the last couple of years is certainly not going to be easily repeatable in the near future, and yet during much of this retail sales have continued to fall in real terms.

Having said this, we should never imagine life is entirely a one way street, and we do have quite an interesting and hard to interpret Retail Sales Purchasing Managers Index reading for May (this is a kind of early warning reading).




Having fallen sharply in April, German sales bounced back in May, showing the largest monthly gain since November 2006. The index jumped from 44.6 to 56.6. The turnaround was commonly attributed by panelists to improved sales of seasonal clothing and household goods resulting from improved weather. Looking back at the index, and the data in recent months (not to say years) it is hard to see the May reading as anything more than temporary "bounce" following several months of quite weak readings.

German Unemployment May 2008

German unemployment unexpectedly rose in May for the first time in more than two years as record oil prices and the euro's appreciation weighed on exports. The figures however do need to be treated with caution, since computer glitches at the labour office, the reclassification of some categories of unemployed and the simple fact that Easter was in March and not April have all, to some extent, been playing around with the data.

The number of people out of work, adjusted for seasonal swings, rose 4,000 from April to 3.31 million (although the unadjusted number was still down a bit - see chart below) according to the Nuremberg-based Federal Labor Agency today. Up to May unemployment had fallen every month since January 2006.

With oil close to a record and the euro's 16 percent increase against the dollar in the past year making exports of goods like cars less competitive, companies may well be becoming more reluctant to hire workers. The European Central Bank has indicated its unwillingness to lower interest rates while inflation and money supply continue to surge strongly in the 15 country eurozone.

Exports unexpectedly fell for a second month in March as a global slowdown and the rising euro weighed on orders, according to the Federal Statistics Office in their monthly report.



In Europe, Germany's main export market, service and manufacturing industries expanded at the slowest pace in five years in May, according to the PMI flash estimates.

Data from NTC Economics gave a preliminary estimate for the Eurozone services PMI which slumped to 50.6 in May from 52.0 in April, way below forecasts for a much more moderate fall to 51.8. The level equals January's four and a half year low and takes the index closer to the 50 level below which the index would be indicating a contraction in activity. The equivalent index for manufacturing dropped to 50.5 from 50.7, slightly above forecasts, which were expecting a slightly weaker reading of 50.4, but still marking the lowest reading since August 2005.

The flash Purchasing Managers Index for Germany's service sector fell to 53.7 in May from 54.9 in April, while in the manufacturing sector activity dipped to 53.5 from 53.6 a month earlier. So basically we have the impression that things are slowing all round.

However, Frank Weise, head of the Federal Labour Agency which released the employment figures, warned that this months drop in the rate of employment creation “should not be interpreted as the first sign of a slowdown in the labour market.”

The agency said statistical effects and changes in the law also played their part. The seasonally-corrected figures, it said, were being distorted by unseasonably warm weather during the winter while changes in the legal status of jobseekers over 58 alone accounted for a 10,000 increase in the number of unemployed.

The mild weather, in particular, meant fewer jobs had been lost during the winter than in previous years, resulting in a lower reduction in unemployment during the spring season, the agency said. The statistical agency also pointed to employment figures – whose publication lags one month behind the jobless data – showing an 54,000 increase in job creations in April.


As reported by the Federal Statistical Office on the basis of first calculations for April 2008, the number of persons in employment whose place of residence was in Germany was 40.08 million. That was an increase by 650,000 persons (+1.6%) on April 2007. Compared with March 2008, the number of persons in employment rose by 153,000 (+0.4%) in April 2008.

So the positive trend in overall employment creation which has existed in Germany over the last two years certainly continued into April. It is true however that in April the increase in employment was somewhat smaller against the previous year than in earlier months (both in March and February 2008 the rate of increase had been + 1.8% compared with the same month one year earlier). One explanation being offered for this is that particularly favourable employment figures had been recorded for the earlier months (and this is, incidentally, also reflected in the particularly favourable GDP numbers). The mild winter on the one hand and an increased utilisation of the seasonal short-time working allowance on the other will have contributed to this result. The allowance is available only during the period 1 December to 31 March.

In April 2008, the number of persons in employment in Germany was 40.25 million after seasonal adjustment, that is after elimination of the typical seasonal variations. That was a seasonally adjusted increase by 27,000 (+0.1%) on March 2008.

Based on the labour force survey the Federal statistics Office reported a seasonally adjusted 3.19 million unemployed for April 2008. That figure, which is a provisional estimate, was calculated according to the concept of the International Labour Organization (ILO). Compared with the same month a year earlier (April 2007), the number of unemployed was down by 480,000 persons or 13.1%. The seasonally adjusted unemployment rate – which is harmonised across the EU and measured as the share of unemployed in the total labour force – amounted to 7.4% in Germany and was thus considerably below the level of the corresponding month of the previous year (8.5%).

The raw, unadjusted figures showed a 131,000-strong drop in unemployment in May – smaller than the fall observed in May last year - down to a total of 3.28m jobseekers. Internationally comparable figures using International Labour Organisation methodology put the number of jobseekers at 3.39m in April and the unemployment rate at 7.8 per cent.

German GDP Q1 2008 Detailed Results

As already reported here following the first release of data from the Federal Statistics Office on 15 May 2008, the German economy started 2008 with what seemed on the surface to be considerable momentum since on a price, seasonal and calendar adjustmented basis gross domestic product (GDP) was up by 1.5% higher in the first quarter of 2008 over the level achieved in the last three months of 2007.




Economic growth in the first quarter of 2008 was supported primarily by gross fixed capital formation, which continued to increase at a fair clip. Compared with the fourth quarter of 2007, investment in machinery and equipment was up by 4%, and capital formation in construction rose by even 4.5% owing to the comparatively mild winter. Overall final consumption expenditure, increased by 0.5%, the first such rise in over a year, however breaking this down we find that government final consumption expenditure was up markedly (+1.3%), while the final consumption expenditure of households showed a smaller increase (+0.3%) against. Inventory building, on the other hand, added a substantial 0.7% points to growth in the first quarter. Exports continued to grow (+2.4%) but in fact since imports rose even more strongly (+3.5%), foreign trade actually had a downward effect on gross domestic product in Q1 2008 when compared with the preceding quarter (see chart below).



So the bottom line is that the of the 1.5% increase in q-o-q GDP, nearly half (0.7% points) was accounted for by a growth in inventories, while 0.4% was accounted for by a growth in construction which was in part the result of better weather in January and February and scheduled work being advanced (although you can't simply add these numbers since some of the construction work may well have accumulated in inventories), while the net impact of external trade slowed, and household consumption only accounted for 0.2% points.

So basically it would be far from in order to announce this result as strong evidence for anything about the Germany economy at this point, other than that the economy resisted a strong slowdown in Q1. The data from Q2 should make all of this much clearer, I think, we will see what gets to happen to the inventories, and we will see what happens to construction.

Year on year a slight increase (+0.1%) was recorded for the final consumption expenditure of households following a decline in the four preceding quarters (see chart below). According to the statistics office this slight improvement is primarily due to a recovery in private car purchases (follwoing the VAT impact in Q1 2007), since expenditure on transport and communications, which includes also private car purchases, rose by an annual price-adjusted 2.2%.



In the first quarter of 2008, GDP was a price-adjusted 1.8% higher than in the same quarter one year earlier. The growth rate was a calendar-adjusted 2.6% as there had been two working days less in the reference quarter than in the first three months of 2007.



Q1 2008 gross domestic product was achieved by about 39.8 million persons in employment - 686 000 persons or 1.8% more than one year earlier. The number of unemployed (ILO definition) amounted to just under 3.5 million, having a share in the entire economically active population of 8.0%.

Overall labour productivity (price-adjusted gross domestic product per person in employment) rose only very slightly by 0.1% (another bad sign), although as measured per hour worked, there was an increase by 0.8% since the number of hours worked by those in employment rose much less than the number of persons in employment. This is a reflection of how Germany has been creating a lot of part time and temporary work in recent quarters.