German retail sales jumped by the largest amount in seven years in January, data from the Federal Statistics Office showed yesterday, fuelling expectations that private consumption will propel growth in Europe’s largest economy this year.

Retail sales, a notoriously volatile indicator, climbed by 2.9 per cent on the month in real terms, its sharpest increase since January 2008.

That was stronger than the 0.4 per cent forecast in a Reuters poll and exceeded even the highest estimate for a 1.1 per cent gain. The data helped push European shares higher.

“Cheap oil, healthy income gains, low interest rates and fading risks combined to make a very strong start to the year for German retailers,” said Christian Schulz, senior economist at Berenberg Bank.

“Private consumption looks set to be a major growth driver in 2015 and, at this rate, would put a severe upside risk to our forecast of gross domestic product (GDP) growth of merely 0.3 per cent quarter-on-quarter in Q1,” he added.

On the year, retail sales leapt by 5.3 per cent on the year in real terms, their biggest increase since June 2010, as shoppers spent more online and in shops on items such as food, books, jewellery and cosmetic products.

That was far stronger than the Reuters forecast for a 2.7 per cent rise and beat even the highest estimate for a 4 per cent increase. German consumer morale is at its highest level in more than 13 years as shoppers benefit from record employment and higher pay.

Negotiated wages including special payments climbed by 3.2 per cent last year, the biggest increase since the statistics were first compiled in 2010, and Germany’s biggest trade union, IG Metall, has secured an inflation-busting 3.4 per cent hike.