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Inflation and war in Ukraine: German retail stagnates

Status: 05/02/2022 10:37

High inflation and the war in Ukraine are making their mark on consumption in Germany: retail sales are rising only due to the high rate of inflation – adjusted sales, on the other hand, are stagnant.

The German retail sector is not gaining momentum due to consumer sentiment suffering from high inflation and the war in Ukraine. The Federal Statistical Office recorded a 2.1 percent increase in nominal retail sales in March compared to February. However, the increase is solely due to high inflation. Real, or price-adjusted, sales fell by 0.1%. In February there was still a small increase of 0.1 percent. “Real sales in the retail sector have therefore stagnated since the beginning of the year,” determined the statisticians.

The war in Ukraine and high price hikes had recently pushed consumer sentiment in Germany to an all-time low: the Nuremberg GfK market researchers’ barometer for May fell 10.8 points to minus 26.5 points.

Private consumption is currently not a growth factor

The inflation rate reached 7.4% in April, the highest level since 1981, mainly because energy cost Ukraine much more after the Russian invasion. “The full force of high inflation will actually be discharged first,” said Alexander Krüger, chief economist at Hauck Aufhäuser Lampe Privatbank AG. “For the moment, private consumption will not be taken into account”. Even the federal government aid package does not illuminate the consumption situation.

Purchases of food from hamsters

Retailers billed 2.9 per cent in real terms on groceries in March compared to the previous month, although consumption here too was 5.4 per cent lower than the previous year. There was a greater demand for individual goods due to hamster purchases in connection with the war in Ukraine, such as flour and cooking oil.

Trade in textiles, apparel, shoes and leather goods decreased 8.4% from the previous month, while price-adjusted service stations even gained 11.5%. The Internet and mail order business recorded a 7.7% lower turnover.

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