(Reuters) - German retail sales unexpectedly fell in February, data showed on Thursday, quashing hopes that private consumption could help Europe's largest economy to recover in the first quarter.
Retail sales decreased by 1.9% compared with the previous month in real terms. Analysts polled by Reuters had predicted a 0.3% increase in February.
"That was probably it for the positive growth in the first quarter. With industrial production weighing on GDP, hopes were pinned on private consumption to compensate," VP Bank Chief Economist Thomas Gitzel said.
Food retail sales fell by 1.7% in real terms compared to January. Non-food business fell by 1.0%, while internet and mail order sales saw a month-on-month real sales decline of 2.8%.
German consumer sentiment has been subdued despite declining inflation as uncertainty remains high, with a survey by the GfK and Nuremberg Institute for Market Decisions (NIM) forecasting only a slight rise for April, to -27.4 from -28.8.
Real income growth and a stable labour market are good foundations for rapid recovery in the consumer economy, but there is still a lack of planning security and optimism, NIM consumer analyst Rolf Buerkl said.
There is scope for improvement, according to an Ifo survey published on Thursday that found the business climate and expectations in the retail sector brightening in March.
"The pessimism that has been such a feature of recent times is receding," Ifo analyst Patrick Hoeppner said.