German retail sales increased much more than expected in June following an easing of Covid-19 restrictions, supporting a consumer-driven recovery in Europe's largest economy.

The Federal Statistics Office said retail sales rose 4.2% on the month in real terms after an upwardly revised increase of 4.6% in May. The June reading was more than double a Reuters forecast for a rise of 2%.

On the year, retail sales - a notoriously volatile indicator often subject to revisions - jumped 6.2% in real terms following an upwardly revised drop of 1.8% in the previous month.

The German economy returned to growth in the second quarter but bounced back less strongly than expected amid supply chain bottlenecks that are hitting industry, data showed on Friday.

The supply chain worries and rising coronavirus infections due to the more contagious Delta variant have dampened the outlook for the economy. Nonetheless, the central bank expects growth of 3.7% for this year and 5.2% next year.

A survey showed last week that consumer sentiment held steady heading into August as shoppers grew more ready to spend, but took a less upbeat view on the economic outlook on worries about the rising numbers coronavirus cases.