German Retail Sales Stagnate in August
August data indicated that retail sales stagnated in Germany, thereby ending a three-month period of expansion. At 49.9, down from 50.3 in July, the seasonally adjusted Germany Retail PMI was broadly in line with the 50.0 no-change mark.
The latest reading pointed to the second-weakest month-on-month sales performance since September 2010. Anecdotal evidence generally attributed the stagnation in sales during August to subdued underlying consumer sentiment.
Retailers in Germany signalled that like-for-like sales were higher during August than those seen 12 months’ earlier. However, the rate of year-onyear sales growth was only marginal and much slower than that recorded in July. Around 35% of respondents noted sales growth on an annual basis in August, compared to 31% that registered a reduction.
Weaker than expected consumer demand in August was highlighted by the index measuring actual sales against plans. Around one-third of retailers indicated that sales fell short of initial targets, compared to just one-in-five that registered greater than anticipated sales.
Retailers are also pessimistic about the prospects for sales at their stores in one month’s time. Negative sentiment about the sales outlook has now been recorded for four months in a row, although the degree of pessimism was the least marked since May.
Concerns about the short-term outlook for sales did not prevent a further expansion of employment
levels across the German retail sector in August.
Higher workforce numbers have now been recorded for 27 successive months, which is the longest period of continuous expansion since the survey began in June 2002.
Average prices paid by retailers for goods for resale increased sharply during August, with the rate of inflation reaching a four-month high. Wholesale price inflation has been recorded in each month since January 2010. The latest rise was partly attributed to increased costs for fuel and transportation.
Higher costs, alongside discounting strategies to stimulate sales, led to a further squeeze on operating margins. That said, the latest drop in margins was the slowest for a year. The value of goods ordered for resale rose marginally in August, which in turn contributed to another increase in stocks of goods at retailers.
Tim Moore, senior economist at Markit and author of the report said: “Germany’s retail sector posted one of its worst performances of the past two years in August, with like-for-like sales stagnating since July and again falling short of initial forecasts. Although the squeeze on margins eased over the month, wholesale price inflation remained sharp and accelerated further from the year-and-a-half low posted in May.”