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Pedestrian zone in Munich: The trend is clearly downward

Photo: Sven Hoppe / dpa

German retailers only increased their sales last year thanks to rising prices. It is expected to have grown by 2.4 percent compared to 2022, the Federal Statistical Office said on its first estimate. In real terms, however, sales were 3.1 percent lower – the last time there was a larger decline here was in 2009 in the wake of the global financial crisis. This time, specialist food shops such as bakeries and butchers, as well as shops selling furnishings, household appliances and building supplies, recorded particularly heavy losses.

"Consumer sentiment is still suffering from the effects of Russia's war in Ukraine and high inflation," said Stefan Hertel, spokesman for the German Retail Association (HDE). "Of course, the industry is hoping for better sales in 2024." In view of the expected decline in inflation, "cautious optimism" seems appropriate.

Most recently, the trend showed a surprisingly clear downward trend in the beginning and traditionally high-turnover Christmas business: In November, with special promotions such as "Black Friday" and "Cyber Monday", real sales shrank by 2.5 percent compared to the previous month. Economists polled by the Reuters news agency had expected only a mini-minus of 0.1 percent. "A turnaround in consumption is still out of sight," commented Alexander Krüger, chief economist at Hauck Aufhäuser Lampe Privatbank.

The easing of inflation could gradually provide new impetus for private consumption over the course of the year. "The inflation dynamics in Germany have been broken, and the era of really high inflation rates is over," said Sebastian Dullien, scientific director of the Institute for Macroeconomics and Business Cycle Research (IMK). He expects the inflation rate to more than halve in 2024 – to 2.5 percent from 5.9 percent in 2023.

As a result, real wages could grow more significantly again and thus strengthen the purchasing power of consumers. In the third quarter, real wages in Germany rose by 0.6 percent, the strongest increase in more than two years, the second quarter in a row. However, there is no sign of a consumption boom that will pull the German economy out of the doldrums.

mik/Reuters