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German retail sales drop unexpectedly strongly in October

Retail sales in Germany have dropped further than expected in October, raising fears that domestic spending might not offset the country's declining exports to other European nations.

The Federal Statistical Office reported Friday that retail sales declined 2.8 percent in October over September when adjusted for calendar and seasonal variations. Economists had been predicting a 0.4 percent drop.

As Germany's exports to other euro countries have slipped amid the financial crisis, the country has turned more to new markets and domestic spending to spur growth.

UniCredit economist Alexander Koch cautions that German retail sales figures are volatile and that other indicators present a more favorable picture. UniCredit still feels "comfortable with our forecast of a 0.2 percent quarter-on-quarter rise in private consumption in the final quarter," he said.

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