Germany's unemployment declined sharply in February, while retail sales rebounded strongly in January, both surpassing economists' expectations by wide margins, suggesting that the growth in the biggest euro area economy is set to be driven by private consumption as exports suffer due to global factors.

The seasonally adjusted number of unemployed fell by 21,000 in February, figures from the Federal Labor Agency showed on Friday. The decline was much bigger a than the fall of 5,000 economists had predicted.

January's decrease was revised to 4,000 from 2,000.

The non-seasonally adjusted unemployment totaled 2.373 million in February versus 2.405 million in January.

The seasonally adjusted jobless rate remained unchanged at a record low of 5 percent in February. The rate has been at this level since November. The outcome was in line with economists' expectations.

The Federal Statistical Office reported on Friday that the ILO jobless rate eased to 3.2 percent in January from 3.3 percent in December.

"All in all, the German labor market remains an impressive growth engine for the entire economy, currently defying all external downside risks and uncertainties," ING economist Carsten Brzeski said.

"It is a perfect illustration of the current divide of the German economy between a strong domestic and stuttering external part."

Earlier on Friday, official data showed that German retail sales grew at a stronger-than-expected pace in January, entirely reversing a steep decline in the previous month, to log the biggest growth in over two years.

Retail sales rose 3.3 percent month-on-month, preliminary data from the Federal Statistical Office showed. The increase was much bigger than the 1.90 percent gain economists had predicted.

The latest sales growth was the biggest since October 2016, when sales rose at the same pace.

The decline for December was revised to 3.1 percent from 4.30 percent.

On a year-on-year basis, retail sales grew 2.6 percent in January, which also exceeded economists' forecast of 1.20 percent gain.

The pace of growth was the fastest in three months. In October, sales grew 6 percent.

The December decline was revised to 1.6 percent from 2.10 percent.

Sales of food, beverages and tobacco grew 2.7 percent year-on-year and non-food sales rose 2.3 percent.

Within non-food, sales in the other retail group that includes books, jewelry and so on surged 4.1 percent. Internet and mail orders sales jumped 6.2 percent.

The market research group GfK has forecast 1.5 percent growth in German private consumption this year.

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