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Germany - Retail Sales Expected to Remain Dour
Aug 29, 2008

Rising inflation along with low job market are likely to taint the retail sales in Germany in coming months by pushing the consumer spending down.

Germany’s retail traders’ organization, HDE, has forecasted that the retail sales would fall in coming months under heavy pressure from surging inflation that eroded the household expenditure in Europe’s biggest economy. In view of the disappointing performance by the retail industry during H1 2008, not much improvement could be expected in remaining months. So groups have revised their retail sales projections to fall around 1%, reported
m&c.

According to the statistics, the retail sales index for the month of September 2008 is forecasted to decline 1.5 points from the revised 1.9 points in August this year. However, it was at 2.0 points in the first reading data of August 2008. Economic expectations also fell down to 21.8 points in August 2008 against 8.0 points in July 2008, but consumer income expectations moved up by 3.2 points to –16.8. Moreover, the index highlighting consumers’ plans to go for big ticket purchases plummeted to 27.9 points in August 2008 against 26.2 points in July this year.

The fall in retail sales in Germany is attributed to a number of factors but rising inflation due to continuous surge in food and fuel prices is the prime factor as it eats into consumer spending power. Increase in fuel prices has upset household budgets and consumers are forced to shell out more for energy.

Furthermore, the retail sales are badly hit by poor employment conditions as the country is facing the problem of rising unemployed population. Crisis in the financial market, strong Euro, and weak global economy also affected the retail sales in Germany.

According to industry analysts, over two-third of German population believe that their financial situation will get worse in coming months due to rising inflation. Rise in inflation is primarily grounded on record hike in oil and gas prices and there are apprehensions that the sales further go down next year with sluggish economic growth.

According to a Research Analyst at
RNCOS, “Retail sales in Germany are falling and have affected the economic growth of the country. Moreover, we are not seeing any improvement in coming months due to opposing economic scenario. But retailers can turn the table by providing discounted items and attractive schemes to customers and thus support the national economy too.”

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