German retail sales fell by 1.8 per cent last year, final figures released yesterday by the national statistics service showed, the biggest decline since euro notes and coins were introduced in 2002.

While the figure was better than an earlier estimate of a two per cent drop, it suggested that Europe's biggest economy "will most likely have expanded only slightly" in the last three months of 2009, Commerzbank analyst Simon Junker said.

Consumption has nonetheless resisted better than expected as Germany's economy suffered its worst post-war recession, with activity contracting by five per cent overall last year.

Sales picked up by a provisional 0.8 per cent in December compared with November, slightly below analyst forecasts for 0.9 per cent compiled by Dow Jones Newswires.

"Apparently, German consumers did not let the financial crisis ruin their Christmas shopping," ING senior economist Carsten Brzeski said.

"Still, private consumption seems to be caught in a zig-zag pattern without getting to a real upward trend," he noted.

German retailers faced a tough climate in 2009 as spending dwindled amid fears about growing unemployment.