German retail sales recover in December after contracting in November

Germany’s retail sales recovered in December after declining in November. The seasonally adjusted headline Retail PMI rose to 52 in December from 49.6 in November. This indicates towards a renewed sequential growth in retail sales in December. The pace of growth was consistent with the 2016 average. There were reports of a stronger client turnout at the end of 2016. Retail sales were also up on an annual basis in December. Year-on-year growth alleviated since November; however, it remained marked overall.

Sentiment towards the one-month outlook fell significantly in December. The level of optimism was the joint-weakest since the end of 2014, with like-for-like sales forecast to be widely in line with plans, noted Markit.

The factors that are likely to suppress sales growth in the next three months include a negative economic outlook, planned construction and refurbishment, new regulations and lower footfall after Christmas. However, panellists still cited several reasons to be positive regarding the outlook including spring sales, new products, the opening of new stores, a rising customer base, better advertising, improved consumer sentiment and demand from wealthy foreign clients.

In the meantime, German retailers missed their sales targets for the seventh straight month in December. However, the degree of underperformance was just modest with the respective index above its long-run average. The pace of purchase price inflation accelerated to a 19-month high in December.

Certain companies commented on increased import costs stemming from a weaker euro. Significant cost pressures added to a sharp decline in gross operating margins at German retailers. The latest fall was the most marked in four years. The value of goods bought for resale in German retail sector rose for the eleventh month in row in December. Though easing, the rate of growth continued to stay strong overall. The pace of hiring decelerated to a 39-month low in December, with the respective index hinting a near-stagnation in staffing levels.