August 8, 2022

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German retail sales fall by largest rate on record

2 min read

German retail sales fell at the largest annual rate since records began in 1994, highlighting the scale of the economic challenges facing the eurozone’s largest economy.

Retail sales volumes dropped 8.8 per cent in June compared with the same month last year, data from Destatis, the German office for national statistics, showed on Monday.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said the figures were “miserable” and mainly due to the impact of soaring prices on consumer spending. Inflation in Germany is at a multi-decade high of 8.5 per cent.

The plunge in retail sales follows news on Friday that German economic growth stagnated between the first and second quarters, and figures showing that business and consumer confidence is now at its lowest level since the early months of the pandemic.

While the eurozone economy as a whole grew 0.7 per cent between the first and second quarters, analysts increasingly expect the region to enter a downturn in the coming months as the impact of Russia’s invasion of Ukraine on energy markets and confidence bites.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said manufacturing activity in Germany and elsewhere was “sinking into an increasingly steep downturn, adding to the region’s recession risks”.

The closely watched purchasing managers’ indices for eurozone manufacturing, also out on Monday, showed factory activity was now slipping across the eurozone.

The S&P Global PMI for German manufacturing dropped below the crucial 50 level, which separates an expansion in activity from a contraction, for the first time in two years.

Across the region, new orders fell — a sign that conditions are likely to remain tough in the coming months. The biggest risk facing the region is that tensions with Moscow worsen, triggering Russia to reduce — or halt — gas flows to the EU. Economists believe this would trigger a major recession across the bloc.

Line chart of Purchasing managers’ index, below 50= a majority of businesses reporting a contraction showing Eurozone manufacturing activity slips into contraction

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2022-08-01 08:24:12

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