German consumers remain cautious

03 December 2009

BERLIN: Retail sales posted a slight improvement in Germany last month, but consumers in the country are still displaying a considerable degree of hesitancy when it comes to making major purchases.

According to the Federal Statistics Office, retail sales in Europe's biggest market rose by 0.5% in October, in real terms, when compared with totals from September, but were down 1.7% year-on-year.

Overall, figures have declined by 1.8% over the period from January to October, a trend that analysts say is likely to continue going into 2010.

Sebastian Wanke, an economist at DekaBank, said "private consumption will remain very weak in the coming months. I expect poor Christmas sales. Rising unemployment and fears of job losses will hold back spending."

More positively, HDE, the industry body, has forecast that sales will fall by just 2% over the holidays, and also predicts the demand for goods such as electronic equipment, jewellery and books will remain strong.

However, Carsten Brzeski, a senior economist at ING, suggested that the long-term picture may be rather more favourable than the short term one.

"Consumer confidence has weakened in recent months and increasing unemployment could dent the last spark of hope for a spending spree," he said.

"Still, high pent-up demand after years of wage moderation and one of the highest personal savings rate of all Eurozone countries make private consumption still an untapped source of future growth."

Data sourced from Reuters; additional content by Warc staff