German retail sales plunge by 2.1 percent in March

German retail sales marked the biggest monthly drop in March since January 2009, provisional adjusted data showed on Friday reflecting the dampening effect of rising prices on shoppers. Sales in Germany, the biggest economy in the European Union, plunged by 2.1 percent, the seasonally adjusted figures showed. On a 12-month basis the drop was an even stronger 3.5 percent, the national statistics office said. Analysts polled by Dow Jones Newswires had expected a month-on-month decline of just 0.4 percent in March, and the statistics office told AFP that the drop was the strongest since a fall of 3.2 percent in January 2009. Goldman Sachs economist Dirk Schumacher noted that the volatile sales data was subject to strong revisions however, and that it was thus "difficult to say much about the March figure." Monthly retail sales had fallen by 0.4 percent in February, according to final figures which were revised slightly lower by the Destatis office from its initial estimation of minus 0.3 percent. The picture was only slightly brighter in nominal terms, with a monthly decline of 1.8 percent in March and an annualised loss of 2.0 percent. Sales of food, drink and tobacco fell by 4.8 percent from March 2010 on an adjusted basis, while non-food sales fell were down by 2.4 percent, Destatis said. Economists and German officials have forecast a pick-up in consumption as the employment picture brightens, and hope it will provide a second driver of growth alongside German exports. On Thursday, the Federal Labour Agency said that unemployment had declined again in April and was hovering around the lowest level in about two decades at 7.1 percent of the workforce. But a rebound in economic activity and ultra-low interest rates have also seen inflation pick up this year in Germany, hitting 2.4 percent this month according to official data released on Wednesday. The European Central Bank's inflation target is just below 2.0 percent. Inflation, along with the natural disaster in Japan and unrest in North Africa and the Middle East have left German consumers unsettled, the GfK economic research institute said Wednesday. Its household confidence indicator for Germany is set to fall to an indexed 5.7 points in May, following a drop in April that was the first for 10 months, from a three-year high of 6.0 in March. Berlin nonetheless expects the economy to grow by 2.6 percent this year, one of the strongest rates in the 17-nation eurozone, as German exporters benefit from growth in emerging economies. Schumacher noted that "business sentiment among retailers remains very high and the strength of the labour market also points to solid growth in consumer spending. The March figure could eventually be revised upwards therefore, he said.