The German retail sector experienced a slightly stronger decline in sales in June than initially anticipated. According to preliminary data released by the Federal Statistical Office (Destatis), sales dropped by 0.8% after adjusting for inflation compared to the previous month.

Economists surveyed by Dow Jones Newswires had forecasted only a 0.3% decrease. In nominal terms, the decline was 0.5%.

On a year-on-year basis, retail sales in June were 1.6% lower in real terms but 4.3% higher in nominal terms. This difference between nominal and real results reflects the retail sector's significant increase in price levels.

First-half performance

In the first six months of the year, retailers experienced a 4.5% decrease in sales after adjusting for inflation. However, nominal sales saw a 3.6% increase compared to the same period last year.

The retail sales of food products saw a real decrease of 5.8% in the annual comparison while nominal sales increased by 7.6%. Statisticians attributed the real sales decline combined with the nominal increase to the substantial rise in food prices, which became the main driver of overall inflation in the first half of 2023.

High food prices lead to a decline in retail spending

The significant increase in food prices was considered the main cause of the real sales decline in the food retail sector over the past two years, with each month witnessing a decrease in real sales compared to the respective month in the previous year.

Non-food retail sales also experienced a real decline of 3.6% in the first half of the year. However, nominal sales rose by 1.1%.

Particularly, the internet and mail-order retail segment faced substantial drops, recording a real decline of 7.3% and a nominal decline of 2.6% compared to the same period last year.