Sharp drop in German retail sales to slow consumer momentum

Germany April retail sales fell for the second consecutive month in a row, taking markets by surprise despite upbeat labor market and buoyant consumer sentiment. This is a clear indication for a slowing consumer momentum in the coming months.

Retail sales, excluding automobile sales in the Eurozone’s largest economy, dropped 0.9 percent from the preceding month, adjusted for inflation and seasonal swings, the Federal Statistical Office said Tuesday.

Retail sales rose 2.3 percent y/y, after adjusting for inflation, beating investor anticipation of 1.7 percent on the backdrop of two extra working days in April this year compared to the same period a year ago. However, a Reuters poll of economists had predicted retail sales to rise by a weaker 1.9 percent.

The country’s gross domestic product grew by a very healthy 0.7 percent at the start of the year, as falling oil prices, a cheaper currency and falling consumer prices all encouraged Germans to engage into spending.

German retail sales in the four months through April, however, were up 1.9 percent from the same period in 2015, adjusted for inflation.