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VAT rise hits German retail sales

German retail sales slumped in January, as a sales tax rise introduced at the beginning of the year started to bite.

Sales fell by a larger-than-expected 5.1% from the previous month, the biggest fall in almost eight years, the Federal Statistics Office reported. Germany raised value-added tax on purchases to 19% on 1 January, in an attempt to lift federal finances.

Experts have warned that the VAT rise will crimp spending in the first three months of the year. „This is a real blow,” said Sebastian Wanke at DekaBank. „This exceeds the worst fears. Aggressive rebates and mild weather should have lured consumers into the stores. We still can't exclude the possibility of a VAT shock.” (BBC News)