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Retail sales in Europe’s largest economy registered their biggest drop in three years last month.

Year-on-year German retail sales were 2.1 per cent lower in February compared to the same month last year – far lower than a forecast of 0.3 per cent growth and the joint worst since November 2014. The annual decline comes despite month-on-month sales growing 1.8 per cent from January to February.

German consumers helped power the country’s economy to its best pace of growth in six years in 2016. Still, climbing inflation also hit its highest level in four years last month at 2.2 per cent, raising concerns of a squeeze to consumer spending.

Inflation has been driven higher by climbing food costs, with Destatis revealing that food, drink and tobacco sales slipped 2.9 per cent last month, while supermarket figures were also down 2.8 per cent. Other retail goods, including books and jewelry, were down 4 per cent.

German policymakers will be hoping the February figures are just a blip as the latest inflation figures show a steep fall in consumer price growth back down to 1.5 per cent.

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