Germany's retail sales declined for a second straight month in July, defying expectations for a rebound after the coronavirus pandemic-related lockdown curbs were eased, preliminary data from the Federal Statistical Office showed on Wednesday.

Retail sales fell 0.9 percent month-on-month, while economists had forecast a 0.5 percent increase.

The decline for June was revised to 1.9 percent from 1.6 percent.

On a year-on-year basis, retail sales grew 4.2 percent in July after a 6.7 percent gain in June, which was revised from 5.9 percent. Compared to February 2020, the month before the outbreak of Covid-19 in Germany, the turnover in July 2020 was 0.9 percent higher, Destatis said.

Sales of food, beverages and tobacco grew 4.2 percent year-on-year and non-food sales increased 4.4 percent. Sales in supermarkets, self-service department stores and hypermarkets rose 4.6 percent. Retail sales of food, beverages and tobacco in specialized stores grew 0.4 percent, the first increase since the beginning of the pandemic in March.

Internet and mail order business logged the biggest increase in the non-food sector with an annual growth of 15.6 percent.

Sales of furniture, household appliances and building materials also increased significantly, up 12.9 percent.

Meanwhile, sales of textiles, clothing, shoes and leather goods and those of other goods in department stores decreased 8 percent and 14.5 percent, respectively.

Germany's consumer confidence is set to weaken in September after three months of improvement, as income expectations deteriorated, survey data from the market researcher GfK showed last week.

"An increase in the number of infections and the fear that coronavirus-related restrictions will be further tightened are creating uncertainty and consequently dampening the mood," Gfk said.

The reduction in value added tax (VAT) which came into effect in Germany on July 1 may be boosting propensity to consume but has not yet been able to provide a stronger stimulus, the firm added.