German Retail Sales Fall in January as Tax Increase Takes Effect

German retail sales fell 1.4% in January from the same month last year as a hefty increase in value-added tax took effect, according to government figures released Friday.

Sales were down 5.1% in seasonally adjusted terms compared with December, the Federal Statistics Office said in a preliminary estimate.

The estimate was based on figures from six of Germany's 16 states, which together account for nearly 70% of the country's retail sales. The statistics office said final figures tend to be somewhat more positive.

The government increased VAT paid by consumers to 19 from 16% on Jan. 1 in a move aimed largely at controlling the budget deficit in Germany, Europe's biggest economy.

While price hikes appear to have been less severe than some feared, a consumer confidence index compiled by Germany's GfK research group has declined this year.

The statistics office said sales of groceries, drinks and tobacco were down 2.6% in January from a year earlier, while clothing sales were down only slightly and those of household appliances and building material rose by 3.3%.