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German retail sales outlook clouded despite surprise rise in November

German retail sales rebound in November
German retail sales rebound in November   -   Copyright  Thomson Reuters 2022
By Reuters

BERLIN -German retail sales rose unexpectedly in November, data showed on Tuesday, lifting them to a record annual high despite renewed COVID-19 restrictions which held back a consumer-led recovery in Europe’s largest economy.

The Federal Statistics Office said retail sales were up 0.6% on the month in real terms. That beat a Reuters forecast of a fall of 0.5%.

For 2021, retail sales rose 0.9% in real terms and 3.1% in nominal terms, reaching record highs despite curbs on non-essential visits to the shops.

“Due to renewed coronavirus restrictions, the situation will remain tense for the time being,” said Alexander Krueger, an analyst with Hauck Aufhaeuser Lampe private bank.

With industry still struggling amid supply shortages in microchips and other components, it would be hard for manufacturing to fill the overall output gap created by weaker consumption, he added.

The GfK market research institute said last month that consumer morale would deteriorate further as the pandemic and rise of the Omicron variant push the economy to the brink of recession.

The Ifo institute expects the German economy to shrink by 0.5% on the quarter in the final three months of 2021 and stagnate in the first three months of 2022. This would bring Germany close to a technical recession, defined as two consecutive quarters of contraction.

High infection rates during the fourth coronavirus wave in Germany, triggered by the Delta variant, had already resulted in restrictions for retailers and service providers in December.

Germany banned unvaccinated people from entering non-essential establishments. The so-called 2G rule, which allows access only for vaccinated or recovered people, has hit the Christmas business.

The rapid spread of the Omicron variant is now clouding the outlook for retailers at the start of 2022 as well.

Chancellor Olaf Scholz and state premiers are expected to discuss further measures and restrictions at a pandemic emergency meeting on Friday.