(Recasts with broader Bundesbank measure)
By Dave Graham
BERLIN, Dec 1 (Reuters) - Retail sales in Germany rose slightly during October, helping to offset the impact of slackening exports, but with unemployment expected to rise next year, the outlook for next year is cloudy.
Sales, including turnover at gas stations and cars, rose by 0.4 percent from September, Bundesbank data showed on Monday. A narrower measure excluding gas stations and auto sales had earlier shown a decline of 1.6 percent on the month.
Ulrike Kastens, an economist at Sal. Oppenheim in Cologne, said with turmoil on financial markets peaking in October, it had been a tough month for consumers.
"So it's pretty amazing that we got a better result with cars," Kastens said. "But it is pleasing."
"I don't think this will alter the general trend, so we shouldn't be more than cautiously optimistic. But it suggests consumers will have a stabilising influence on the economy."
Economists said falling oil prices had probably helped to encourage spending on fuel, boosting the October result.
Compared with the previous year, total sales were down by 1.7 percent in October, which in 2008 had the same number of shopping days as the same month a year earlier.
"Now consumer sentiment has brightened, the oil price has dropped and I can imagine that we will see slight growth in the remaining weeks of the quarter," Kastens said.
With employment at a record high in Europe's biggest economy, inflation easing and the savings rate at a 14-year high, analysts say German consumers are well positioned to help the country as it battles recession.
The GfK market research firm's latest survey of consumer sentiment suggested the mood would improve going into December.
CHRISTMAS CHEER
The economic slowdown has been led by a deterioration in foreign demand, hitting Germany's exports.
Figures from the VDMA plant and equipment makers' association published on Monday showed foreign engineering orders fell by 19 percent on the year in October.
The immediate outlook for retail spending is mixed.
A survey of retail purchasing managers in November showed German retail sales were even weaker last month, though the country's HDE industry association said Christmas sales in Europe's largest economy had started briskly.
"Business on the first advent weekend went really well," HDE spokesman Hubertus Pellengahr said on Sunday. "Most retailers are happy. That applies to all of last week too."
The HDE has forecast retail sales over Christmas will rise by around 1 percent compared with last year.
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The Federal Statistics Office's narrower retail gauge showed sales in the first 10 months of this year were down 0.4 percent in real terms and up by 2.3 percent in nominal terms.
Kastens at Sal. Oppenheim said German consumers had yet to feel the full impact of the financial crisis.
"That will happen until next year when job cuts kick in and we see unemployment rising again," she said.
Pellengahr at HDE said the government needed to cut taxes to encourage shoppers to keep spending.
Despite rising pressure from her own conservatives, Chancellor Angela Merkel has so far ruled out tax cuts until after the next federal election due in September 2009. (Additional reporting by Nicola Leske, Editing by Andy Bruce)