German retail sales tumble much further than expected
By Josh White
Date: Wednesday 01 Jun 2022
(Sharecast News) - German retail sales plunged far beyond expectations in May, according to data released on Wednesday morning, as rising consumer prices and lockdowns in China took their toll.
According to Destatis, retail sales slumped 5.4% month-on-month, making for the biggest fall in a year, seriously beating market forecasts for a 0.2% decline.
Food sales were the hardest hit, plummeting by a record 7.7% month-on-month, while non-food sales were 4.4% lower.
Clothing, textiles and shoes and sales at department stores were the largest contributor to the decline, falling 4.3% and 7%, respectively.
Online and mail-order sales were the only reprieve in the data, rising 5.4% month-on-month.
On a year-on-year basis, Destatis said retail sales were 0.4% lower than in May 2021.
"We currently think higher prices and tighter financial conditions are doing their part to suppress demand," said analysts at RaboResearch on Wednesday, calling the retail sales data from Germany a "case in point".
"This should allow supply to catch up and eventually lead to lower inflation - assuming that supply plays ball too, which is highly uncertain."
RaboResearch said rising cost pressures were indeed fuelling a broadening of inflation pressures, adding that "the time for nuances" had passed.
"The European Central Bank needs to be seen doing 'something' in order to preserve those last remnants of policy credibility it possesses.
"There is only so much rate setters can do when inflation is driven by a lack of supply rather than an excess of demand, but they have to play the hand they're dealt and hope for the best."
That, they said, suggested that policy was "being made up once we go along", and as such there would be a variety of possible scenarios.
"The ECB's Kazimir, a hawk, floated the idea of a 50-basis point hike in September after a 25-basis point hike in July, and then possibly lifting the policy rate into restrictive territory."
Reporting by Josh White at Sharecast.com.
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