German consumer confidence steady as retail sales fall

Consumer confidence in Germany appears to be holding up, even though retail sales in Europe's top economy fell for the second month in a row, data showed on Thursday.

"The first survey after the parliamentary elections paints a calm picture," market research company GfK said in a statement.

"A small uptick in economic expectations suggests that the German economy will recover in the coming months, albeit slowly.

"The propensity to buy indicator has almost matched the record high it reached last month and has slipped only fractionally. And income expectations also remain optimistic, despite marginal losses in October," the statement said.

Overall, GfK's headline household confidence index was forecast to slip to 7.0 percent in November from 7.1 points in October.

This reading is based on responses from about 2,000 households regarding their expectations about pay and the economy as a whole in the coming months, as well as their willingness to spend money.

The outlook for Europe's top economy is currently fairly positive, even if some recent data have fallen short of expectations.

On Wednesday, jobless data showed that unemployment in Germany is steady, close to its post-unification lows.

Nevertheless, the relative optimism of the GfK survey was soured by disappointing retail sales data for last month, which showed a second consecutive monthly fall in September.

Retail sales slipped by 0.4 percent in price, calendar and seasonally-adjusted terms in September compared with August, the federal statistics office Destatis calculated.

Retail sales had already contracted by 0.2 percent in August.

The data were "weaker than anticipated and it certainly doesn't bode well for household consumption data for the third quarter," said Newedge Strategy analyst Annalisa Piazza.

Natixis economist Johannes Gareis noted that retail sales "are notoriously volatile and prone to frequent revisions, which still offers room for an upwards revision."

All in all, "we remain positive and expect private consumption to be a solid pillar of German growth towards the end of this year, which is backed on low unemployment and buoyant German consumer morale, staying close to its highest level in nearly six years," Gareis said.

But Christian Schulz at Berenberg Bank was more cautious.

"Retail sales often get revised substantially with later releases, but even a significant upward revision of the September figure would not point to the buoyant growth consumer confidence surveys would suggest," he said.