Falling retail sales in Germany signal weak start to quarter

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German retail sales fell far more than expected in July after two months of strong increases, data showed on Wednesday, a sign that a consumer-led recovery in Europe’s largest economy could falter in the third quarter .

The Federal Statistical Office said retail sales fell 5.1% on the month in real terms after a revised 4.5% jump in June and a 4.6% increase in May. The July reading missed a Reuters forecast for a decline of 0.9%.

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The monthly comparison was heavily skewed by the lifting of Covid-19 restrictions on purchases in most parts of the country in June, the statistics office said.

Retail sales – a volatile indicator often subject to revision – edged down 0.3% in real terms year over year, he added. Compared with February 2020, the month before the coronavirus crisis hit Germany, retail sales rose 3.8%.

The German economy returned to growth in the second quarter, but rebounded less strongly than other eurozone countries as supply chain bottlenecks slowed industrial production.

Problems with the supply of raw materials and intermediate goods, coupled with the increase in Covid-19 cases due to the more contagious Delta variant, is causing companies to have a darker view of the months to come.

Bankhaus Lampe analyst Alexander Krueger believes retail sales should pick up in the coming months.

, with a strong labor market and more and more companies cutting back on short-time work programs introduced during the pandemic.

However, overall support to the economy from household spending may be weaker in the third quarter than many had hoped, he added.


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