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E.Coli outbreak hits German retail sales in May

MYT 6:16:01 PM

BERLIN (Reuters) - German retail sales fell at their fastest rate in four years in May, pointing to a growth slowdown in Europe's largest economy, though economists said an E.coli outbreak that led to a drop in food sales was a major factor.

A vendor sells vegetables at a market in central Belgrade June 11, 2011. (REUTERS/Ivan Milutinovic)

Retail sales fell 2.8 percent in real terms on a monthly basis, preliminary data from the Federal Statistics Office showed, missing a Reuters forecast for a 0.5 percent gain.

A Bundesbank breakdown of the data showed the nominal value for food, drinks and tobacco products sliding 3.6 percent on the month in May, when the E.coli outbreak that left killed dozens in Germany was most acute.

"The E.Coli outbreak is probably the largest single cause for the weakness in May," said Christian Schulz, an economist at Berenberg Bank. "There was uncertainty about the exact cause for a long time (so) consumers abstained from buying fresh food."

On an annual basis, the data showed an increase of 2.2 percent in real term retail sales, versus a forecast for a 2.3 percent rise.

Economists said the monthly figure was a fresh sign the pace of economic recovery may be slowing, but noted the indicator was notoriously volatile and could be significantly revised.

"These figures offer further proof that the economy lost steam throughout the Spring," Ralph Solveen, an economist at Commerzbank said.

"Yet it would be very surprising if private consumption collapsed now. The fundamental data is just too good for that: unemployment is falling, employment rising and salaries gaining strength again."

Other data on Thursday showed German employment rising by 39,000 in May, and June unemployment data showed the jobless rate stayed at its lowest since reunification.

Munich-based think tank Ifo said on Wednesday it expects Germany's economy to grow 3.3 percent this year, slowing to 2.3 percent in 2012.

(Additional Reporting by Rene Wagner; Editing by John Stonestreet)

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