German retail sales rebound in May, beat expectations

German retail sales rebounded in May, beating expectations that reassured that consumer spending will continue to propel growth in Europe's largest economy while the foreign demand weakens.

Retail sales grew by 0.9 percent in real terms on the month, the Federal Statistics Office said. Economists polled by Reuters had expected a slightly weaker rise of 0.7 percent. In another positive sign for domestic demand, the data for April was revised up to a decline of only 0.3 percent from a previously reported fall of 0.9 percent.

Further, retail sales rose by 2.6 percent y/y in real terms, compared with an upwardly revised increase of 2.7 percent the previous month. Economists polled by Reuters had expected a rise of 3.0 percent in May. In the less volatile period from January to May, retail sales jumped by 2.0 percent in real terms compared with the same period in 2015, the office said.

Among the product categories, food, beverages and tobacco sales were up 2.2 percent in May on the year in real terms, while non-food sales expanded by 2.8 percent. Selling via the internet and by mail order rose by 8.5 percent from the same month of the previous year, Destatis said.

The retail sales data came in after a survey that concluded on Wednesday, showing German consumer sentiments at highest level in nearly a year heading into July, indicating that private consumption is likely to support growth in Europe's biggest economy over the summer.

Meanwhile, the spending power of German consumers is currently boosted by record high employment, rising real wages and ultra-low borrowing costs, making domestic demand the most important growth driver.

German retail sales are considered a volatile indicator, prone to significant revisions. Hence, economists tend to look at monthly data with caution and focus more on the three-month average, reports confirmed.