German Retail Sales improved marginally in August suggesting consumer spending is beginning to expand again, but the data missed analysts estimates. Retail sales rose by 0.3% versus 0.6% eyed. On an annual basis, retail sales dropped 0.8% compared to forecast for a 0.9% fall. This was the second consecutive monthly decline after a 1.6% dip in sales in July. Sales of retail trade of food, beverages and tobacco rose 0.8% annually in August but non-food retailing fell 0.4% indicating that the German consumer remains cautious about making durable goods purchases.

Overall the Retail Sales data showed that demand in Europe’s largest economy remains lackluster as concerns over slowdown in EZ growth as well slight increase in unemployment weigh on consumer sentiment. The latest GFK survey has shown no improvement in expectations as we move into the key Christmas selling season.

The latest German Retail sales data shows that policymakers cannot count on domestic demand to spur growth in the economy and with exports slowing, the country faces a very low growth environment for the foreseeable future. The EUR/USD ignored the data as risk sentiment remained positive with IBEX index leading European shares higher. The pair has held near session highs of 1.2940 in quiet morning European trade.

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