(German retail sales bounced back in May after falling for two consecutive months, data showed on Thursday, giving some reassurance that consumer spending will continue to propel growth in Europe’s largest economy as foreign demand weakens.

Retail sales grew by 0.9 per cent in real terms on the month, the Federal Statistics Office said. Economists polled by Reuters had expected a slightly weaker rise of 0.7 per cent.

In another positive sign for domestic demand, the data for April was revised up to a decline of only 0.3 per cent from a previously reported fall of 0.9 per cent.

On the year, retail sales rose by 2.6 per cent in real terms, compared with an upwardly revised increase of 2.7 per cent the previous month. Economists polled by Reuters had expected a rise of 3 per cent in May.

In the less volatile period from January to May, retail sales jumped by 2 per cent in real terms compared with the same period in 2015, the office said.

The data came after a survey showed on Wednesday that German consumer morale reached its 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.

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.

Reuters