Germany's April retail sales show repeating the first quarter boom will be tough

Harriet Green
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A shop in Berlin, Germany (Source: Getty)

German retail sales dropped unexpectedly in April, down 0.9 per cent month-on-month, as the country's output growth continues to slow, following a very strong winter quarter.

Consensus was for a 0.2 per cent increase, after March's meagre 0.1 per cent rise.

As Christian Schulz of Berenberg explains, in addition to boosting construction, the mild winter weather probably upped footfall in shops to an extent that's difficult to replicate in spring.

If they remained unchanged for the rest of the quarter, second quarter retail sales would end up being 0.6 per cent below the first quarter average.

But sales data may well still improve this month and next, with an upward revision for April also likely. "Retail sales are volatile and often get revised heavily later, with sign changes not uncommon", says Schulz, pointing out the upward revision of the March data from -0.7 per cent to 0.1 per cent.

This, however, still means achieving a similar rate of growth to the 1.6 per cent seen in the first quarter "will be challenging", and something reflected in GDP growth, too. Berenberg expects that to slow down from 0.8 per cent in the first quarter to 0.4 per cent in the second. It'll then settle around trend levels of 0.5-0.6 per cent.

Germany will remain a growth engine in the Eurozone, helping former crisis countries export their way out of trouble due to its strong domestic demand.