German retail sales and French consumption fall

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German retail sales and French consumption fall

German retail sales and French consumption fall
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Retail sales fell in April in Germany, the eurozone’s largest economy.

German retail sales were down by 0.4 percent from the previous month, putting a dampener on hopes that domestic demand there will be a major driver of growth.

Economists blamed the weather saying a late spring and unusually chilly temperatures pushed prices for seasonal vegetables higher, prompting households to cut back on spending.

Christian Schulz, senior economist at Berenberg Bank, warned: “This effect may last into May as well, before gradually fading.” He adding that the underlying fundamentals for consumption remained strong.

Retail sales rose by a solid 1.8 percent on the year, helped partly by an extra two shopping days in April 2013 compared with last year.

Private consumption saved Germany from slipping into recession in the first three months of this year and the government is relying on consumers to help the economy grow by 0.5 percent this year as exports, its traditional backbone, weaken due to the euro zone crisis and a global slowdown.

France weaker

Weather was also a contributory factor to a fall in French consumer spending in April.

Consumption dipped 0.3 percent from March, but the decline was less than expected and car sales actually rose by 1.8 percent from the previous month.

Household spending accounts for more than half of economic output in France and it needs to pick up to revive the economy, which slipped into recession in the first quarter.

Spending on food fell 3.3 percent from March, when it was boosted by the Easter weekend, but energy consumption rose 2.8 percent in April as unusually chilly weather persisted, data from statistics office INSEE showed.

France’s Socialist government is forecasting that spending will grow by a meagre 0.2 percent this year after shrinking in 2012 – its first annual contraction in two decades.

Many economists view that forecast as too optimistic and predict a slight contraction, given that consumers remain pessimistic.

Opinion polls in recent weeks have shown that French households expect their purchasing power to contract further this year and more than half plan to cut back on purchases in the months ahead.