By Maria Martinez
(Reuters) -German retail sales fell much more than expected in July, data showed on Friday, clouding the outlook for consumption in the third quarter.
Retail sales fell by 1.5% compared with the previous month, while analysts polled by Reuters had predicted a 0.4% decrease.
"Retail sales in Germany have slowed steadily this year after strong growth at the end of last year," said Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics.
Germany's economy shrank by 0.3% in
the second quarter, further dimming expectations of a sustained recovery by Europe's biggest economy this year.
While there is little doubt that foreign demand is under pressure due to U.S. tariffs, there had still been some hope that private consumers would drive an increase in demand, said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
Wages are rising again and inflation is low, so there should be room for increased spending, he noted.
"However, these hopes were disappointed in July," de la Rubia said.
Sentiment among German consumers is expected to fall for the third time in a row in September, with households' growing concerns about possible job losses and uncertainty about inflation weighing on the mood, the GfK survey showed on Wednesday.
IMPORT PRICES DOWN
German import prices decreased by 1.4% year-on-year in July, the statistics office said on Friday.
Analysts polled by Reuters had predicted a 1.2% decrease.
Since the German economy purchases many primary products and raw materials from abroad, higher import prices are reflected in inflation data with a time lag.
Germany will publish national inflation data for August later on Friday, with the harmonised inflation rate expected to rise to 2.0% from 1.8% the previous month.
(Additional reporting by Emanuele Berro, Maria Rugamer and Simon Ferdinand Eibach; editing by Rachel More, Aidan Lewis)
