Food Drives Stronger Retail Sales In March, Outlook Still Weak

German retail sales printed strongly in March, rising by 1.8% M/M (real, seasonally- and calendar-adjusted, vs +1.5% cons; -1.5% prior, revised from -1.9%). Also on a yearly comparison, the series printed above 0 for the first time since October 2023, at +0.3% Y/Y (vs -2.2% prior).

• The strong rise in March was driven by food sales jumping by 3.2% M/M (SA), potentially driven by an early Easter this year. Non-food sales meanwhile were a bit weak at -0.2% M/M (vs -0.6% prior).
• On the less volatile 3M/3M measure, retail sales are still subdued (-1.0% vs -1.0% prior).
• Looking into the details of the non-food categories, gas station fuel sales decreased 0.5% M/M (-1.3% prior), the sport equipment, publishing products and toys category saw a 2.6% M/M decrease (vs +5.1% prior), while furniture, Hi-Fi, and IT equipment printed at +1.6% M/M (vs +1.9% prior)
• Consumer spending contributed 0.2pp to real GDP growth in Q4'23, somewhat counterintuitively given weak prior retail sales data. On a non-adjusted basis, even with the stronger March print, real retail sales declined 0.7% 3M/3M in the first three months of the year - consistent with a negative sequential contribution to GDP in Q1 (as corroborated by Destatis in the preliminary Q1 GDP release).
• Looking ahead, German retail consumption does not look like it will emerge quickly from recent weakness. The ifo Business Climate in the retail sector continued to brighten in April but remained in contractionary territory, improving 3p to -14.5. Retailers assessed their current situation as notably better then prior but largely remained cautious regarding their business expectations.

MNI, Destatis