GERMANY MAR RETAIL SALES -2.4% M/M; -8.6% Y/Y

German retail sales contracted in March, falling -2.4% m/m against consensus expectations of at +0.3% m/m uptick. Compared to March 2022, retail sales dived -8.6% y/y, and remain -1.3% below pre-pandemic March 2019 levels.

• Food sales fell -1.1% m/m and saw a record Y/Y contraction at -10.3% y/y as food price inflation (+22.3% y/y in March) saw households cut spending. Non-food sales also fell -2.3% m/m.
• Looking forward, consumer sentiment is improving in the German economy. Germany’s forward-looking GfK consumer sentiment indicator increased for a seventh consecutive month for May.
• GfK Income expectations rebounded significantly, with government energy support, cooling inflation and less-recessionary outlooks largely underpinning optimism.
• Nonetheless, the propensity to buy subindex remains downtrodden despite another uptick and GfK sees private consumption dragging on GDP this year.
• German GDP was flat in Q1, after a -0.5% q/q Q4 contraction. Household and government consumption expenditure were the key downwards drivers, and today's retail contraction echoes that German growth outlooks remain pressured for now.