Annually, retail sales shrank by 6.3%, down from both the 2.3% decrease forecast by economists and the previous month's rise of 2.5%. February's growth was revised up from a 0.3% decline.

Destatis notes on its website that the number of sale days in March 2008 was 24, compared to the 27 sale days during the same month in 2007.

"When adjusted for calendar and seasonal variations, the March turnover was in nominal terms equal to that (0.0%) and in real terms 0.1% smaller than that of the preceding month," Destatis said in a press release.

"Compared with the corresponding period of the previous year, retail turnover was in the first three months 2008 in nominal terms 1.3% larger and in real terms 1.2% smaller than that in the first three months of 2007."

A Natixis research note highlighted that including the sale of cars, retail sales increased quarterly by 0.9%. This, according to the Natixis economists, suggests a 0.4% quarterly increase in consumer spending.

Based on recent data, Natixis economists do not expect the same resiliency seen in previous quarters to continue into Q2.

"An important part of the 1Q-08 production filled up inventories and the business climate started to weaken at the start of the second quarter."

"Given a good start in 2008, it is likely that German GDP growth 2009 will be lower (1.4% in 2009 vs 1.6% in 2008)," the research note concluded.

While retail sales in March showed a decrease, Commerzbank analyst Matthias Rubisch highlighted that due to upward revisions in January and February, first-quarter sales were much stronger than previously believed.

"Now figures show an increase of 1.2% for Q1, despite the slight decline in March," Rubisch emphasized.

However, Rubisch also acknowledged the slow rate of consumption and suggested that Q1 growth was simply a "reflex" to the decline seen in the previous quarter.

"The trend in retail sales is at best flat," Rubisch stated. "Sentiment in retail trade has recently declined again."

"Due to the strong increase in consumer prices, private consumption will probably rise by only less than 1% this year."

In fixed income, the yield on the Schatz rose to 3.7611% from 3.7488%. Significant reaction was seen in the Bund, with yields rising to 4.132% from 4.1008% within 15 minutes.

In currencies, the euro fell immediately to $1.5446 from $1.5463 before rebounding to previous levels within a few seconds.

Against the pound, the euro depreciated to £0.78178 from £0.78278.

European traders will be watching closely for the March euro zone producer price index, scheduled for release on May 6.

By Todd Wailoo, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Nancy Girgis, This email address is being protected from spam bots, you need Javascript enabled to view it