German retail, manufacturing indicators improve sharply

City A.M. Reporter
GERMANY’S retail and manufacturing sectors substantially improved in October and November, indicating a robust recovery in Europe’s biggest economy, figures showed today.

German retail sales rose by 2.3 per cent in October, their biggest month-on-month gain in almost three years, according to official figures.

The rise was the strongest monthly gain since January 2008 and surpassed all forecasts in a Reuters poll of economists. The strongest projection was for a two per cent gain.

Manufacturing sector progress also accelerated in November, boosted by strong growth in new orders and spurring the fastest job creation since March 2008, a purchasing managers' survey also showed today.

The Markit Purchasing Managers' Index (PMI) rose to 58.1 in November, its highest level since August and a further improviement on October’s level of 56.6.

It was substantially above the 50-level that separates expansion from contraction, but came in below an earlier flash estimate of 58.9.

The two sets of data further backed evidence that Germany’s economic recovery is holding up despite expansion slowing after record growth in the second quarter of this year.

“Germany's manufacturing sector saw another robust expansion of production levels in November, supported by the fastest rise in new orders for four months,” said Tim Moore, economist at Markit, which compiled the manufacturing survey.

“The continuing recovery in production requirements and capacity utilisation resulted in the sharpest rate of jobs growth for over two-and-a-half years.”

Other surveys showed German business morale improved in November to its strongest level since 1991, and unemployment fell in November for a 16th straight month.

"The conditions for a lasting upturn in domestic demand haven't been this good in a long time," said UniCredit economist Alexander Koch.

"There's a lot suggesting that the fourth quarter will be good and Christmas-season business will be quite good as well."

The retail data, based on sales in seven states accounting for 76 per cent of total retail turnover, showed sales were down 0.7 per cent in real terms on an annual basis, the Federal Statistics Office said.

But in the year through October, they rose by 2.0 per cent in nominal terms and by 1.0 percent in real terms from the same period last year.

Germany's strong recovery has helped pull the euro zone to improved growth in recent quarters, but there are also concerns it may be leaving other struggling economies behind.