Consumption ‘killer’ in Germany revealed

Inflation and high economic uncertainty have dented private spending, an official report indicates

Retail sales in Germany fell sharply in December in a sign of weakening consumer spending in the country even during the Christmas season, data published by the country’s statistics service Destatis revealed on Tuesday.

Spiraling inflation, a raging energy crisis and expectations of a further slowdown in Europe’s largest economy have eroded consumer activity, sending retail sales down 6.4% year-on-year in December, much worse than the 1.8% anticipated by economists, data showed.

On a monthly basis, retail turnover slumped 5.3%, in contrast to a 1.9% increase in November.

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

READ MORE: Energy costs push French inflation higher

Online and mail-order sales also recorded a drop of 3.8% compared to the previous month and a 7.2% decrease on an annual basis.

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

Germany’s loss of prosperity over the past year has resulted in weak consumption, VP Bank chief economist Thomas Gitzel explained. He warned that the trend would persist as “there is little change in this core dynamic for the time being.”

He also added that ailing consumption would further weigh on the country’s economic output this quarter.

Find more stories on economy and finance in TROIB business