HDE forecast for 2023: Retail expects a drop in sales

Status: 01/31/2023 12:08 p.m

The German retail trade turned over less last year than in 2021. The industry association HDE is expecting bad business again this year. Consumers save primarily on groceries.

In view of high inflation and sluggish consumption, German retailers are preparing for difficult business this year. Sales are likely to grow by two percent, the German Retail Association (HDE) predicts today. Price-adjusted (real), however, it should fall by three percent – and thus significantly more than in 2022.

“The retail trade will hold its ground well in 2023 under still difficult conditions, but will lose some ground,” said HDE President Alexander von Preen when presenting the new forecasts.

The number of retail businesses is also likely to continue to decline, especially in small and medium-sized towns. “The environment remains characterized by uncertainty,” said von Preen. At present, every second trading company rates its business situation as only satisfactory, almost every fourth as bad.

“Recovery not in sight”

In 2022 as a whole, retail sales rose by 7.8 percent, as previously reported by the Federal Statistical Office (Destatis). Because of the high inflation, however, this corresponds to a decrease of 0.6 percent in real terms compared to the previous year. “The reason for the real slump in sales is likely to be primarily the significant increase in consumer prices for food and energy, among other things,” the statisticians explained.

According to Destatis, sales in German retail in December were 4.8 percent lower than in the previous month. Price-adjusted (real) there was even a drop of 5.3 percent. This decline comes as a surprise: economists surveyed by the Reuters news agency had expected slight growth of 0.2 percent.

Inflation and “desolate consumption mood”

“The desolate consumer mood had announced the consumption crash,” said chief economist Alexander Krüger from the Hauck Aufhäuser Lampe private bank. “The decline is extremely severe, the high inflation has become a consumption killer.”

At 7.9 percent, consumer prices rose more sharply than at any time since the Federal Republic came into existence. This affects the purchasing power of consumers. “Because stress factors such as monetary policy will have an even greater impact, there is no recovery in sight,” said Krüger, referring to rising interest rates. “The massive losses in real income will keep consumption on a leash for a long time to come.”

Grocery sales plummeted

According to the statistical office, retail sales of food in 2022 saw the highest decline in sales since the start of calculations in 1994, at 4.6 percent. Restrictions in gastronomy have led,” it said.

In the non-food trade, on the other hand, companies achieved a real sales increase of two percent. The retail trade in textiles, clothing, shoes and leather goods in particular increased: by 27 percent in real terms. However, it was not enough to compensate for the losses from the Corona years. Compared to 2019, it remained at a minus of 7.6 percent. The mail-order and internet trade, which has been booming for a long time, also had to accept a setback: its real 8.5 percent drop in sales was above average.

Is food getting more expensive?

According to the Munich-based ifo Institute, price expectations are still high and are falling only slowly, especially in the consumer-related areas. Grocery, toy and stationery retailers are planning to ask customers to pay more than in the previous month. On the other hand, price expectations in the retail trade for bicycles, entertainment and household electronics and in the catering industry have declined.

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