German retail sales rebounded in March as declining unemployment, slowing inflation and higher wages bolstered households’ purchasing power.

Sales, adjusted for inflation and seasonal swings, rose 0.8 percent from February, when they fell a revised 0.9 percent, the Federal Statistics Office in Wiesbaden said today. Economists forecast a gain of 1 percent, the median of 26 estimates in a Bloomberg News survey showed. Sales increased 2.3 percent from a year earlier.

With German unemployment at a two-decade low and the economy outperforming most of its euro-region peers, workers are winning some of the highest pay increases since the early 1990s. Business confidence unexpectedly rose to a nine-month high in April and inflation slowed to the lowest level in more than a year, boosting consumers’ disposable income.

“Conditions for retail sales are good,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “People that are less concerned about unemployment are more willing to spend money. At the same time, we have higher wage growth this year, which should also boost consumer spending sooner or later.”

IG Metall, Europe’s biggest trade union representing 3.6 million workers, is demanding a 6.5 percent pay raise. German unemployment probably fell in April, a Bloomberg survey shows. The Federal Labor Agency will release the report on May 2.

Hugo Boss AG, the German luxury-clothing maker controlled by Permira Advisers, said last week that first-quarter operating profit gained 13 percent and confirmed a forecast for sales to gain 10 percent this year. Praktiker AG, Germany’s third-largest home-improvement retailer on April 26 reported first-quarter sales that beat analysts’ estimates.

“If the labor market continues to develop as positively as is currently being forecast, it can be assumed that the consumer climate will be able to develop in an overall stable manner in the coming months,” market research company GfK said.