The reluctance of consumers to buy continues to weaken the German retail trade. The food business is particularly affected. Experts fear another shop death.
Consumer reluctance to buy is increasingly affecting German retailers. Their sales in March were 1.3 percent lower than in the previous month, as the Federal Statistical Office announced today. Adjusted for inflation, i.e. in real terms, sales even fell by 2.4 percent – the sharpest drop in the past five months.
Economists surveyed by the dpa news agency had expected growth of 0.4 percent, after a fall of 0.3 percent in February. Compared to the same month last year, the retail trade even recorded a real drop in sales of 8.6 percent.
“Declining purchasing power private households”
“The decline in retail sales reflects the falling purchasing power of private households in Germany as a result of the energy price shock and high inflation,” said Sebastian Dullien, Scientific Director of the Institute for Macroeconomics and Business Cycle Research (IMK).
In the coming months, however, the loss of purchasing power is likely to subside thanks to stronger wage increases and tax- and levy-free inflation adjustment premiums. “Then private consumption should also gradually recover,” said Dullien. The consumption level of the pre-Corona year 2019 should not be reached again until 2025 at the earliest. “The energy and food price shock means half a decade lost for German consumers,” said Dullien.
“Sales are clearly on a downward trend,” commented the chief economist at Hauck Aufhäuser Lampe Privatbank, Alexander Krüger, on the development. “Because of the high inflation, retail will continue to have a hard time.” The German Retail Association (HDE) fears that shops will die, especially since the costs have also risen. The HDE predicted that around 9,000 businesses will close this year.
Save on groceries
In March, retail sales of groceries fell by 1.1 percent in real terms compared to the previous month. Compared to the previous year, there was even a slump of 10.3 percent. “This is the strongest decline in sales since the start of the time series in 1994 compared to the same month last year,” emphasized the statisticians.
The main reason is likely to be expensive food, which cost 22.3 percent more in March than a year earlier. “In March, food price inflation was three times higher than the overall inflation rate,” according to the Federal Office. Economist Dullien described this development as worrying. “Here it can be assumed that poorer families in particular, who often buy food of poor quality anyway, will now save even more,” said the IMK director.
Real non-food retail sales fell 2.3 percent mom in March. The Internet and mail order business, which has been booming for a long time, was particularly affected, recording a decline of 4.8 percent.