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By Brian Rohan
BERLIN, March 5 (Reuters) - German retail sales fell in January, data showed on Thursday, in a sign rising joblessness was weighing on consumers despite a slowdown in inflation.
Preliminary figures from the Federal Statistics Office showed retail sales fell by 0.6 percent in January in seasonally adjusted terms, below the 0.2 percent month-on-month increase forecast in a Reuters poll -- although the data followed significant upwards revisions to the previous month's figures.
December's reading was revised up to show a monthly rise of 0.5 percent, compared to a 0.2 percent drop originally reported.
Simon Junker, an economist at Commerzbank, said the sales outlook could be foreseen despite the series' volatility.
"This is basically in line with the trend which we expect to see for this year. Retail sales are weak, but they're not disastrous. However, in the course of the year we expect to see a marked decline in turnover," he said.
Year-on-year, sales fell in January by 1.3 percent in real terms, and by 1.2 percent in nominal terms.
The figures are based on retail data which do not include vehicle sales and turnover at gas stations. Until this month, the Bundesbank had published a retail sales figure including this extra data, but will no longer do so.
January's data lent little support to recent improvements in consumer sentiment, despite a report last month from the GfK market research group which said it expected consumer morale to brighten for a sixth month in a row in March.
"Purchasing power has risen thanks to falling petrol prices and higher wages, but unemployment is on the up. That's dampening people's desire to spend," said Alexander Koch, an economist at Unicredit.
German unemployment rose by 40,000 in February, bringing the adjusted total to 3.311 million people, or a jobless rate of 7.9 percent.
Many German firms have avoided heavy layoffs by turning to "Kurzarbeit" -- a unique legal provision that allows them to cut staff hours for up to 18 months.
PREPARE FOR THE WORST
German retailers are readying for a tough year.
On Wednesday the world's second-biggest sporting goods maker
Adidas
And last month German-based Puma
Puma Chief Executive Jochen Zeitz said the company would batten down the hatches this year: "Prepare for the worst and hope for the best. That's what we are doing," he said.
Europe's largest economy is expected to suffer its biggest contraction since World War Two this year, with some analysts saying it could shrink by as much as five percent.
The government has agreed twin economic stimulus packages worth some 81 billion euros ($101.5 billion) to try to cushion the impact of the global downturn on the German economy, partly by giving consumers incentives to buy new cars.
But it has hesitated to make sweeping tax cuts to boost consumption as some other countries have.
Consumer spending accounts for over half of Germany's gross domestic product. The HDE retailers' association expects 2009 sales to be flat or fall as much as 1 percent in nominal terms. (Additional reporting by Dave Graham, editing by Mike Peacock)