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German retail sales seen falling more than expected in 2023 as inflation bites

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German retail sales are expected to fall more than previously expected in 2023, according to the German retail federation HDE, with high inflation expected to squeeze consumer spending.

Retail sales are seen falling by 4% in real terms, down from a previous estimate of a 3% contraction, the HDE said.

Data last week said Germany’s real-terms retail sales grew 0.4% on month in May, but lagged the same month last year by 3.6%, with food sales especially weaker.

“It’s unfortunately the worst year in many, many years,” HDE President Alexander von Preen said at a press conference in Berlin.

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“Significantly higher costs for energy and goods purchasing, as well as weak private consumption, put pressure on the retail sector in the first half of the year,” he said.

However, he expects to see a brightening situation in the second half of 2023, and more stable conditions ahead.

According to an HDE survey, 35% of retailers expect sales to decline in second half of the year, and for 2023 as a whole, only a little over one in three expect sales to rise compared with 2022.

Companies named high energy prices as a top issue, and von Preen urged Germany’s government to provide a fair price for all companies, not just relief for energy-intensive industrials.

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Inflation in Germany was 6.4% in June, according the German statistics agency Destatis, rebounding from 6.1% in May, with underlying price pressures still strong.

Inflation more generally is also hitting consumers hard, with a quarter of respondents to an HDE survey saying that they may no longer be able to get by, with 45% saying they’d limit their spending due to high food prices.

“Consumers are watching the price changes and adjusting their shopping behavior. They often buy less, and in many cases they switch to cheaper products,” HDE Managing Director Stefan Genth said.

Since retailers live by private consumption habits, the sector suffers from higher consumer prices and falling real incomes, Genth added.

Write to Andreas Kissler at andreas.kissler@wsj.com Ed Frankl at edward.frankl@wsj.com

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