1.4% Slump Recorded for German Retail Sales in September

German retail sales dropped in September from the previous month, their second consecutive decline and a possible sign that terrorism concerns and global economic uncertainties have started to undermine household consumption in Europe's largest economy.

German retail sales in seasonally and calendar-adjusted terms declined 1.4% for September and the annual increase was held to 0.4%. The data was significantly worse than the expected monthly gain of 0.2%. In nominal terms, retail sales decreased 1.1% from August and grew 1% from the same period last year. During January to September, retail turnover advanced 2.1% in real terms and by 2.2% on a nominal basis.

There was an increase in food sales of 3.4%, while there was a significant decline of 2.0% in non-food sales for the month. Over the first nine months of the year, food sales increased 2.2%, while non-food sales data increased 1.7%.

Clothing sales declined sharply by 7.7% on the month with and 8.0% decline over the year, while sales of furnishings were also weak as there was a notable dip in sales at department-store sales. The sharp decline in clothing sales suggests seasonal influences, but a recovery will be needed next month to support confidence. Private consumption in Germany has remained robust throughout the year.

The headline data will trigger some fresh concerns surrounding the overall spending trends, especially as there was a decline in consumer confidence according to the latest survey evidence.

Record-high employment, rising real wages and ultra-low borrowing costs have boosted the spending power of Germans, making consumption the main driver of growth in a traditionally export-driven economy.

Additionally, the yearly value was revised up to an increase of 3.8 percent from a previously reported rise of 3.7 percent. The weak data came after a survey by the GfK Research Institute showed last week that the mood among German consumers worsened heading into November.

But the survey by GfK market research group last week signaled a slight decline in consumer sentiment. GfK cited an "increasingly difficult" external trade environment and terrorism concerns.

The Euro dipped marginally lower on release, although reaction was limited with EUR/USD at 1.0955 from 1.0960 and a quick recovery back to unchanged levels. German bunds were still lower by over 10 ticks on the day.

There will be much greater unease over the outlook if there is no improvement in the data for October, although there is likely to be a solid rebound.

German retail sales data are volatile and prone to revisions.