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Business

German retail sales slump in July after month of gains

German retailers have seen falling sales in the last month, bringing seven months of moderate but steady gains to an end. Analysts are surprised, suspecting rising inflation worries as a reason.

Retail sales in Germany dropped by 0.9 percent in inflation and seasonally adjusted terms in July compared with the previous month, according to figures released by the German Statistics Office (Destatis) Friday.

Compared with July 2011, Destatis said that sales had plunged by an inflation-adjusted 1.0 percent.

The July figure has brought seven months of moderate gains in retail sales to an end, and was described by the German statisticians as the "strongest monthly decline" since May 2011.

Analysts were surprised by the news, as they had predicted a rise by 0.2 percent for July, after robust growth of 0.5 percent in June.

Christian Schulz, economist at Berenberg Bank, attributed the decline to fuel prices, which hit record highs last month and fanned inflation fears among Germans.

"This inflation is immediately felt by people and makes them spend more cautiously. It doesn't necessarily affect consumption as a whole but retail sales are bound to suffer first," he told Reuters news agency.

However, Sal. Oppenheim analyst Ulrike Kastens said she was convinced that consumption would remain a strong pillar of economic growth in Germany, and that the figures shouldn't be overestimated.

"The German labor market is very robust and has resulted in a stable consumption climate, which, taken together, will foster ongoing consumption growth for 2012 as well as for 2013," she told the same news agency.

In the course of 2012, German retail sales have gained 0.6 percent so far. Analysts said the decline in July was no reason to worry as monthly sales data were rather volatile and subject to frequent revision.

uhe/sej (Reuters, AFP, dpa)