FRANKFURT--German retail sales rose less than expected in December, but the annual figures suggest that consumption continued to act as a pillar to economic growth in the final quarter of last year.

Retail sales in December rose 0.2% in calendar- and inflation-adjusted terms compared with November, the Federal Statistics Office said Friday. Economists in a Wall Street Journal survey predicted a rise of 0.5%.

Compared with the year-earlier month, however, retail sales were 4.0% higher--the highest expansion since June 2013--although Destatis noted there was one more shopping day in December 2014 than the comparable period in 2013.

For the full year, retail sales grew 1.4% in price-adjusted terms, Destatis said.

German retail sales are a volatile indicator, however, and are prone to large revisions.

The most recent consumer-confidence survey indicate a promising start to the year for retail sales in Europe's largest economy. Market research group GfK said earlier this week that consumer confidence is set to strengthen in February, taking its cues from low energy prices, which allow more room for other expenditures. The forward-looking confidence indicator is set to reach a 13-year high of 9.3 points in February from 9.0 points in January.

The stabilization of the German economy toward the end of last year played an important role in further improving consumer sentiment. Destatis said in mid-January that growth accelerated in 2014, with a price-adjusted gross domestic product expansion of 1.5%, compared with growth of 0.1% the previous year.

Write to Emese Bartha at emese.bartha@wsj.com

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