Germans are spending more on retail goods as unemployment remains close to a post-reunification low in Europe‘s largest economy, data showed last week, suggesting private consumption will buoy growth this year as exports weaken.

Retail sales rose unexpectedly for a second straight month

Labour Office data showed the number of people out of a job increased by 13,000 to 2.935 million in seasonally adjusted terms for March, missing a Reuters consensus forecast for unemployment to fall by 4,000.

But the unemployment rate held steady at 6.9 per cent, where it has stood since October 2012. That will likely work in German Chancellor Angela Merkel‘s favour as she courts votes ahead of an election in September.

Combined with data released on Thursday showing retail sales rose unexpectedly for a second straight month in February, the unemployment data bodes well for domestic demand, which economic advisers to the German Government expect to drive growth in Europe’s largest economy this year.

“The small rise (in unemployment) is not dramatic. The hard winter is certainly playing a part,” said Thilo Heidrich, an economist at Postbank.

“The labour market is in robust shape despite the economic lull. An indication for that is that the number of those in employment has increased fairly significantly,” he added.

A survey earlier this week showed consumer morale holding steady heading into April as Germans became more upbeat about the economy, with Germans’ desire to shop holding at a good level due to the stable labour market, easing inflation and the low interest rates being offered by banks.

The unadjusted jobless total, which is closely watched in Germany, remained above the three million mark for a third consecutive month but Labour Office chief Frank-Juergen Weise said the labour market remained solid and was largely unaffected by the economic conditions of recent months.

Christian Schulz, senior economist at Berenberg Bank, said the retail sales data for January and February pointed to a quick rebound in the first quarter after a dismal end to 2012.

Year-on-year retail sales were, however, down by 2.2 per cent, though that was partly due to there being one less sales day in February than in 2012.