The German economy returned to growth in the second quarter but bounced back less strongly than expected from the impact of supply chain bottlenecks.

German retail sales increased much more than expected in June following an easing of COVID-19 restrictions, supporting hopes for a consumer-driven recovery in Europe’s largest economy.

The Federal Statistics Office said retail sales rose 4.2% on the month in real terms after an upwardly revised increase of 4.6% in May. The June reading was more than double a Reuters forecast for a rise of 2.0%.

Department stores and specialist suppliers benefited from lifted restrictions, with sales soaring 34% on the month, while a drop in online sales provided early evidence that consumer habits are rotating back to services and away from online shopping.

On the year, retail sales – a volatile indicator often subject to revisions – jumped 6.2% in real terms following an upwardly revised drop of 1.8% in the previous month.

The German economy returned to growth in the second quarter but bounced back less strongly than expected from the impact of supply chain bottlenecks.

Together with rising coronavirus infections driven by the more contagious Delta variant, the supply issues have dampened the outlook for the economy. Nonetheless, the central bank expects growth of 3.7% for this year and 5.2% next year.

The manufacturing sector was boosted in July by faster growth in new orders and employment, a survey showed on Monday, but supply shortages for semiconductors and other intermediate goods continued to hold back production.

Another survey showed last week that consumer sentiment held steady heading into August as shoppers grew more ready to spend, but the rise in coronavirus cases made them less upbeat about the economic outlook.

Source: Reuters

(The story has been published from a wire feed without modifications to the text. Only the heading has been changed)

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