Turnover down: inflation weakens retail sector

Status: 07.10.2022 11:15 am

Consumer reluctance due to high inflation is causing problems for German retailers. Adjusted for price increases, their revenues have fallen recently – except at the gas stations.

In August, German retailers suffered from inflation-plagued consumers’ reluctance to buy, especially when it came to grocery savings. Due to price increases, sales in August of the current year increased nominally both compared to the previous month (plus 0.1 percent) and compared to the same month last year (plus 5.4 percent), as calculated by the Federal Bureau of Investigation. Statistics.

Adjusted for inflation (real), but according to the Wiesbaden authorities, manufacturing turnover fell by 1.3 percent from July to August 2022. Economists polled by Reuters had only expected a 1.1 percent decline. Compared to August last year, there was even a real loss of 4.3 percent.

Germans mainly save on daily food

Consumers, in particular, were hesitant to buy groceries: here the retail trade recorded a real sales decline of 1.7 percent compared to the previous month and even 3.1 percent compared to the same month last year. “This means food retail sales are at their lowest level since January 2017,” the statisticians said. “Consumers are tightening their belts,” said Thomas Gitzel, chief economist at VP Bank. “The food retail sector is currently getting the full breadth of inflation. Citizens are saving on their daily food.”

There were also real sales declines in the trade in textiles and shoes, in household appliances and building materials, as well as in internet and mail order companies. Many people have significant reserves because they were able to travel or shop less during the corona pandemic. But the recent extremely high prices – for example for energy – slow down consumption.

“Stop Spending”

In September inflation reached 10.0 percent, the highest level in decades. And there is no end in sight yet. According to the latest research, the Munich-based ifo institute expects prices in Germany to continue to rise as more and more companies want to pass on the high prices. In the food trade, for example, all the companies surveyed are planning to increase prices.

The experts at the Kiel Institute for the World Economy (IfW) even assume that purchasing power will fall by 4.1 percent next year – and thus stronger than ever before in reunified Germany. As a result, private consumption would contract well into the coming year.

The outlook for the retail sector therefore remains bleak. “High prices for energy and everyday goods, as well as rising interest rates, will continue to weigh on consumption,” said Alexander Krüger, chief economist at Hauck Aufhäuser Lampe Privatbank AG. “If we look in their wallets, many consumers will continue to put a brake on spending.” It is not expected that the state aid will lead to a mood swing.

Consumer mood worse than ever – except at gas stations

A few weeks before the start of the Christmas business, the consumer mood among Germans is worse than ever. The German Retail Association (HDE) monthly barometer, determined by a survey of 1,600 consumers, fell for the third straight month in October, reaching a low of 84.14 points. “Rising cost of living and high energy costs are depressing consumer spending significantly,” the HDE explained the negative development.

However, filling stations showed an upward trend in August: in the last month of the fuel discount, many motorists apparently took the opportunity to replenish their stocks. This resulted in a record increase in sales for gas stations: in August 2022, real sales at gas stations increased by 14 percent compared to the previous month and by 12.6 percent compared to the same month last year.

According to the Federal Bureau, this is the largest increase in sales from either perspective since the start of the time series in 1994. The federal government introduced the fuel discount from June to August to curb inflation.

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