Consumption ‘killer’ in Germany revealed

Lazy eyes listen


According to an official report, inflation and high economic uncertainty have reduced private spending.

Retail sales in Germany fell sharply in December, indicating that consumer spending in the country is weakening even during the Christmas season, according to data released on Tuesday by the country’s statistics service Destatis.

Consumer activity has been eroded by spiraling inflation, a raging energy crisis, and expectations of a further slowdown in Europe’s largest economy, with retail sales down 6.4% year on year in December, far worse than the 1.8% predicted by economists, according to data.

Retail turnover fell 5.3% month on month, compared to a 1.9% increase in November.

“The downbeat consumer mood had heralded the consumption crash,” said Alexander Krueger, chief economist at Hauck Aufhaeuser Lampe Privatbank, adding that “the decline is extremely severe, and high inflation has become a consumption killer.”

Online and mail-order sales were also down 3.8% from the previous month and 7.2% year on year.

“The sharp drop in retail sales demonstrated that even a strong labor market cannot prevent high inflation and uncertainty from denting private consumption,” said Carsten Brzeski, global head of macro at ING.

According to VP Bank chief economist Thomas Gitzel, Germany’s loss of prosperity over the last year has resulted in weak consumption. He predicted that the trend would continue because “for the time being, there is little change in this core dynamic.”

He also stated that the country’s economic output would be hampered further this quarter due to ailing consumption.