High inflation, the energy crisis and expectations of a further slowdown in Europe’s largest economy have eroded consumer activity.
Retail sales in Germany fell sharply in December last year due to high inflation and the energy crisis, which affected the Christmas shopping season, according to data released Tuesday by the Federal Statistical Office (Destatis).
High inflation, the energy crisis and expectations of a further slowdown in Europe’s largest economy have eroded consumer activity, causing in December the retail sales were 5.3% lower compared to the previous month and 6.4% lower compared to last year. Food companies, mail order companies and internet retailers were hit the hardest.
“The sharp drop in retail sales showed that even a strong labor market cannot prevent high inflation and uncertainty from weighing on private consumption,” Carsten Brzeski, global head of macro issues at financial institute ING, told Reuters.
According to Destatis, the drop in sales is mainly due to the sharp rise in consumer priceswhich reached a 7.9% in 2022.
“The pessimistic mood of the consumer had heralded the fall in consumption,” Alexander Kruger, chief economist at Hauck Aufhaeuser Lampe Privatbank, was quoted as saying by Spiegel. “The fall is extremely severe and the high inflation has become a consumption killer“, he added.
The food retail market in 2022 posted a 4.6% drop in real terms, more than ever since records began in 1994, according to the statistics authority. While in December online and mail order sales, which have been booming for some time, also posted a 3.8% drop from the previous month and a 7.2% year-over-year decline.
“Because negative factors like monetary policy will only have an even bigger impact, no recovery in sightKruger said, adding that “massive losses in real income will keep consumption in check for a long time.”