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German Retail Sales - Economic Data Preview
Friday, 09 January 2009 01:32:34 GMT  |  Ilya Spivak, Currency Analyst
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German Retail Sales are expected to add 0.5% in December to lift the annualized growth rate from negative territory to 0.0%. The meager improvement is foreshadowed by a better-then-expected Retail PMI survey: the reading rose to 42.3 in December from 41.3 in the preceding month as stores saw a shallow uptick in activity around the holiday season. Importantly, the boost to sales failed to bring retail sector sentiment out of contractionary territory (a reading below 50 means pessimists outnumber optimists surveyed for the PMI) because it was achieved through sharp price discounts, eating away at firms’ operating margins. On balance, this likely means more job cuts as retailers cut capacity after spending falls back to pre-holiday levels. Earlier this week, unemployment grew more than expected and is likely to continue to expand as both domestic and overseas demand is dwarfed by the spreading global slowdown. This will weigh on disposable incomes and spur precautionary saving, suggesting traders are unlikely to see much follow-through to December’s improvement.

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