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Crisis Strikes German Retail Industry
Oct 26, 2007

Germany is facing economical crisis due to poor retail sales in the month of August, but the country still maintains its position as a world leader in the retail industry.

s per the Federal Statistics Office, 1.4% drop in retail sales in Germany in August 2007 has shattered the hopes that consumption would help in growing Europe’s largest economy.

The data for the month indicated a fall in the year in retail sales in all product categories, barring drugs and cosmetics, which had a marginal rise of 0.9% in 2007.

Tradition-wise, Germany is known for its low consumption and for the slow performance of its economy in the past few years. The belief is that with economic difficulties arising from tight credit conditions and financial instability worldwide, consumers are saving money rather than making huge expenditures. Owing to escalating prices of oil and fuel, wheat and meats that are reared on wheat-based feed, the German consumers have been adversely affected, particularly in spending on non-essential and luxury segments.

The recent extended spell of unfavorable weather has also added the impact on retail sales, driving consumers indoors and away from the stores. The scenario for retail sales is, therefore, expected to show no improvement until the bad weather abates.

Employment in Germany is growing slowly and adding to the negative impact on consumer confidence and their spending. Stefan Bielmeier, an Economist at Deutsche Bank AG in Frankfurt, said, “The discussion of higher energy costs added to consumers' insecurity. The development in retail sales doesn't reflect the favorable situation on the labor market and that's why there's still a certain potential for recovery”, according to the news published by

Due to the dismal state of retail sales, the IW Economic Institute in Cologne predicted a slowdown of 1.9% in 2008 for German economic expansion after 2.5% in 2007.
Bloomberg reported that its earlier prediction was for 2.2% growth in 2008.

The conclusion of a research analyst at
RNCOS is that “Despite the current situation, Germany remains one of the world leaders in the retail industry. However, both temporary and permanent circumstances are hampering the industry growth. But the August retail sales have naturally affected the morale of the German retailers adversely”.

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