By Michael Nienaber
BERLIN (Reuters) - German retail sales rose in June the most in more than 12 years and unemployment edged up less than expected in July, data showed on Wednesday, offering a rare ray of hope that household spending will prop up Europe's largest economy.
Germany's labor market has become the foundation of a consumption-driven growth cycle, now in its 10th year. The job market has so far remained largely immune to an economic slowdown that's being driven by a slump in manufacturing.
Retail sales jumped by 3.5% on the month in June after a revised 1.7% drop in May, measured in real terms, data from the Federal Statistics Office showed. It was the largest monthly increase since December 2006 and easily beat a Reuters forecast of 0.5%.
In the first half of the year, retail sales rose by 2.2% on the year in real terms, the data showed, driven by sharp gains in online retailing.
The sales figures come after a survey published on Tuesday showed consumer morale worsened for the third month in a row heading into August. A global economic downturn, trade disputes and Brexit uncertainty fueled people's fears of losing their jobs and their income.
But the latest report by the Federal Labour Office showed that such fears are unjustified, at least for now. The number of people out of work edged up by only 1,000 to 2.283 million in seasonally adjusted terms. The Reuters consensus forecast was for a rise of 2,000.
The jobless rate held steady at 5.0%, slightly above the record-low 4.9% reached earlier this year.
"Unemployment and underemployment increased in July, mainly due to the beginning of the summer break," said Daniel Terzenbach, a senior official at the Labour Office.
Terzenbach added that the demand from companies for new employees was declining only slightly and employment was continuing to increase, albeit less dynamically than recently.
Nonetheless, Germany's economic output is widely expected to stagnate or even shrink in the comings months.
The DIW economic institute said in its monthly report that it expects the German economy to stagnate in the second quarter and shrink by 0.1% in the third quarter.
"Orders are deteriorating, consumers are becoming more skeptical and even the hitherto robust labor market is losing steam - combined not a good outlook for the current quarter," DIW chief economist Claus Michelsen said.
Preliminary German GDP growth data for the second quarter is due on Aug. 14.