Germans Cautiously Optimistic Despite Shaky Economic Data, U.S. Pressure

Still, retail sales were up 0.2% from September 2012, and for the first nine months of the year they were 0.2% higher than in the same period a year earlier. Overall, trend in German retail sales remained slightly positive.

Results of a survey by GfK, Germany’s leading market research institute, also release on Thursday showed an unexpected slip in German consumer sentiment. The forward-looking consumer sentiment indicator fell for the first time in 10 months to 7.0 points, after hitting a six-year high of 7.1 points in the previous period. The consensus forecast from economists had called for an increase to 7.2 points

Rampant food price inflation gets much of the blame, as it eats into consumers’ disposable income and dampens income expectations. Overall, sentiment remained upbeat in light of a robust labor market. Germans remained generally optimistic about their future income and the improving growth outlook.

On Wednesday, the U.S. Treasury Department pointed to Germany’s export-led growth model as a major factor in the weak economic recovery of the eurozone. In its semiannual currency report, the agency said:

Germany’s anemic pace of domestic demand growth and dependence on exports have hampered rebalancing at a time when many other euro-area countries have been under severe pressure to curb demand and compress imports in order to promote adjustment. The net result has been a deflationary bias for the euro area as well as for the world economy.

What was unusual was that the report identified Germany ahead of China, its usual target, and Japan.