German retail sales post surprise plunge in December amid rising prices

  • Retail sales -5.3% m/m vs +0.2% forecast
  • Economist: sluggish consumption weighing on GDP

BERLIN, Jan 31 (Reuters) – German retail sales unexpectedly fell in December as a Christmas shopping period weighed down by high inflation and the energy crisis revived fears of a more marked slowdown in Europe’s largest economy, data showed on Tuesday.

Retail sales decreased by 5.3% in December compared with the previous month, the federal statistics office said. Analysts polled by Reuters had forecast a 0.2% rise in price-adjusted terms.

Retail sales also fell in December by 6.4% in real terms compared with a year earlier, the office said.

“Just before Christmas, retailers in German city centres missed the big rush,” said VP Bank chief economist Thomas Gitzel.

“The much-cited loss of prosperity is also reflected in weaker consumption, among other things. As there is little change in this core dynamic for the time being, private consumption will continue to be weak,” Gitzel said, adding this would further weigh on economic output this quarter.

The statistics office had on Monday reported that Germany’s gross domestic product declined by 0.2% in the last quarter of 2022, putting a winter recession – commonly defined as two successive quarters of contraction – back on the cards.

A one-off payment disbursed to households in December as part of government relief measures to tackle soaring energy bills helped slow harmonised inflation down that month to 9.6%, but apparently did little to spur consumer spending.

The Ifo economic institute reported on Tuesday that fewer German companies were planning price rises in the next three months, citing its latest survey, but said that price expectations in consumer-related businesses remained high and were declining at a slower pace.

Reporting by Friederike Heine and Rachel More
Editing by Miranda Murray and Arun Koyyur

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