German retail sales suffered their biggest drop for nearly two years in September, falling for the third time in four months, and fuelling worries that Europe's biggest economy has entered recession.
Including cars and turnover at gas stations, sales fell by 3.1 per cent on the month in seasonally adjusted terms, and by 3.8 per cent year-on-year, the Bundesbank said today.
The monthly decline was the biggest since January 2007, when sales plummeted on the back of the government's three percentage point hike in value added tax (VAT) that month.
"The figures suggest the economy contracted in the third quarter. That would mean Germany is in a recession," said Unicredit economist Alexander Koch in Munich.
German gross domestic product (GDP) contracted by 0.5 per cent in the second quarter, and the government has already conceded GDP may have shrunk in the July-September period too - which would put Germany in a technical recession.
Mr Koch said there was unlikely to be any short-term improvement, even though inflation has slowed for three months running, lending some support to purchasing power.
"This is because fears about the future are on the rise due to the financial crisis and the economic slowdown," he said.
Excluding cars and turnover at gas stations, sales were down 2.3 per cent month-on-month in real terms in September, Federal Statistics Office data showed on Friday.
This was far worse than the most pessimistic forecast of a drop of 1.8 per cent in a Reuters poll of economists.
In the first nine months of this year, sales were down 0.5 per cent in real terms and rose by 2.4 per cent in nominal terms, the Statistics Office's figures showed.
A survey of purchasing managers in the German retail industry published yesterday showed sales falling again in October, albeit at a less marked rate than in September.
Other sectors of the economy are struggling too. A monthly survey by the Ifo economic think tanks showed German business expectations plunged in October to their lowest level since re-unification in 1990 as manufacturing sentiment crumbled.