Seasonally-adjusted retail sales dropped by 0.4% MoM in August, from 0.5% MoM in July. On the year, retail sales were up by 3.7%. Retail sales, even though extremely volatile and due to e-commerce and digital services probably currently less relevant as a proxy for private consumption, are the first hard data for the month August. And this first hard data is not too encouraging.
While compared with the second quarter, retail sales are currently still slightly positive, the August drop echoes a broader weakness of the German economy previously indicated by disappointing industrial data. At the same time, however, soft indicators remain strong.
In fact, contrary to a more structural weakness of industrial production and exports, consumption should remain an important growth driver in the months ahead, despite some recent bruises. Employment is moving from one record-high to the other, wages are increasing and - despite yesterday’s increase - inflation remains low. Consumers’ willingness to spend also remains close to all-time highs.
All in all, at the end of a week which started with an extremely strong Ifo index, today’s retail sales data were a bit of a cold shower. It looks as if both extreme optimism and pessimism are currently misplaced. The truth is probably somewhere in the middle. Still, with this bag of mixed data, concerns about the real strength of the German economy are here to stay for a while.