April 30, 2018 / 9:33 AM / 3 months ago

UPDATE 1-German monthly retail sales drop for fourth month running

(Adds comment from economist and details)

BERLIN, April 30 (Reuters) - German monthly retail sales unexpectedly fell in March, data showed on Monday, marking a fourth consecutive drop and dampening recent cheer around a consumer-led upswing in Europe’s biggest economy.

The volatile indicator, which is often subject to revision, showed retail sales decreased by 0.6 percent on the month in real terms, the Federal Statistics Office said.

That confounded the Reuters consensus forecast for a 0.8 percent rise and followed an upwardly revised drop of 0.2 percent in February.

“The weather was likely still bad for shopping in March, but the weakness is nevertheless puzzling,” said Greg Fuzesi at JP Morgan.

“Looking ahead, things should pick up significantly in April/May, when many of the recently negotiated pay increases kick in and when the recent surprise weakness could finally unwind,” he added.

In April, German unions reached an inflation-busting pay hike deal for more than 2 million public sector workers and in February unions secured an unusually high pay hike for 3.9 million workers in the industrial sector, amounting to a roughly 4 percent annual rise for 2018 and 2019.

Private consumption has been a key growth driver in recent years as consumers benefit from rising wages, record-high employment and strong job security but foreign trade propelled Germany’s fourth-quarter growth.

The German Finance Ministry has said growth could slow slightly in the first quarter, but the upswing remains robust and broad-based. Fuzesi said growth could even stall in the first three months of 2018.

On the year, retail sales climbed by 1.3 percent, beating a Reuters consensus forecast for a 1.0 percent increase.

The retail sales data came after a GfK survey published last week showed the mood among German consumers fell heading into May amid fears that a possible confrontation between the West and Russia in Syria and protectionist U.S. trade policies could hurt the economy. (Reporting by Michelle Martin Editing by Paul Carrel and Toby Chopra)

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