UPDATE 1-German labor market and shopping resilient despite manufacturing slump

Michael Nienaber and Joseph Nasr


* Unemployment falls unexpectedly in September

* Retail sales rise in August, in line with forecast

* Weaker inflation could support consumption (Adds retail sales, state inflation)

BERLIN, Sept 30 (Reuters) - German unemployment fell unexpectedly in September and retail sales rose in August, data showed on Monday, helping to allay concerns that a manufacturing slump is taking its toll on a consumption-driven growth cycle in Europe's largest economy.

Germany's export-reliant goods producers are suffering from a slowing world economy and business uncertainty caused by U.S. President Donald Trump's "America First" trade policies and Britain's planned exit from the European Union.

Solid household consumption, booming construction and increased state spending so far have helped to cushion those external shocks as consumers benefit from high employment, rising real wages, moderate inflation and low borrowing costs.

Data from the Federal Labour Office showed the number of people out of work fell by 10,000 to 2.276 million in seasonally adjusted terms. That compared with the Reuters consensus forecast for a rise of 5,000.

The office revised down the joblessness figures for August to a rise of 2,000 from a previously reported increase of 4,000.

The jobless rate in September held steady at 5.0% - slightly above the record-low of 4.9% reached earlier this year.

Labour Office head Detlef Scheele said the economic downturn was partly reflected in the joblessness data. "But all in all, the labor market is still in a robust shape," he added.

Employment remains high but is losing momentum while the demand of companies for new employees continues to slow down at an elevated level, Scheele said.

In a further positive sign for domestic demand, retail sales rose 0.5% on the month in real terms in August after an upwardly revised drop of 0.8% the previous month, data from the Federal Statistics Office showed.

On the year, retail sales rose 3.2% after an upwardly revised increase of 5.2% the previous month, the data showed. Retail sales are a volatile indicator often subject to revision.

The slowing economy also means that consumer price inflation remains moderate, with the effect that employees have more money in their pockets to spend thanks to wage hikes of up to 6%.

Preliminary data from several states released on Monday showed that consumer price inflation slowed in September. It fell to 1.1% from 1.4% in the previous month in Bavaria and dropped to 1.0% from 1.4% in Saxony.

The state inflation readings, which are not harmonized to compare with other euro zone countries, feed into nationwide figures due later on Monday at 1200 GMT. (Reporting by Michael Nienaber and Joseph Nasr Editing by Paul Carrel and Alison Williams)