# Inflation dampens festive spirit as German retail faces slump
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-11-10
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: German Retailers Warn of Worst Christmas Sales Slump Since
Meta Description: HDE warns of the toughest festive season since 2007 with a 10.4% inflation rate. Online retail faces its first ever year-on-year decline.
URL: https://financedigest.com/inflation-dampens-festive-spirit-as-german-retail-faces-slumphtml

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By Rachel More

BERLIN (Reuters) – German shoppers are tightening their purse strings this festive season, the HDE retail association warned on Thursday, forecasting the strongest slump in Christmas sales since 2007 as double-digit inflation weighs on consumer purchasing power.

In price-adjusted terms, retail sales in the crucial November-December period are forecast to drop by 4% year on year, the HDE said.

It was one of the first forecasts from a major European economy for the festive period, which will be one of the toughest as [households struggle to contend with soaring energy and food bills](https://www.financedigest.com/44-of-uk-households-are-worried-theyll-have-to-foot-the-bill-for-net-zero.html "44% of UK Households are Worried They’ll Have to Foot the Bill for Net Zero").

The HDE’s survey of 500 [companies found that a little more than half expected this Christmas](https://www.financedigest.com/why-more-companies-are-asking-new-employees-to-commence-employment-before-christmas.html "Why more companies are asking new employees to commence employment BEFORE Christmas.") sales period in Germany to be worse than last year, while 21% feared it would be considerably worse.

In nominal terms, sales are [expected to rise](https://www.financedigest.com/german-industrial-orders-rise-more-than-expected-in-february.html "German industrial orders rise more than expected in February") 5.4% year on year in the final two months of 2022, the association said.

Sales are only growing through inflation-driven [price increases](https://www.financedigest.com/taylor-wimpey-espana-remain-cautiously-optimistic-as-average-selling-price-increases-by-20-4.html "Taylor Wimpey España ‘remain cautiously optimistic’ as average selling price increases by 20.4%"). This remains a difficult time for retail companies,” said HDE [managing director](https://www.financedigest.com/anya-libova-joins-apester-as-uk-managing-director.html "Anya Libova joins Apester as UK Managing Director") Stefan Genth.

In October [German inflation](https://www.financedigest.com/german-inflation-rate-to-ease-over-course-of-2023-econ-minister.html "German inflation rate to ease over course of 2023 – econ minister") climbed to 10.4%, its highest in about seven decades.

The [retail sector is emerging from two years](https://www.financedigest.com/spains-november-retail-sales-fall-0-6-on-year.html "Spain’s November retail sales fall 0.6% on year") beset by COVID-19 restrictions, including in December 2021 when fears of the newly emergent Omicron variant of the virus forced a pre-Christmas lockdown.

“Today, it’s a different situation. This uncertainty in Europe, with a war that is very close to us, ensures that [consumer sentiment](https://www.financedigest.com/irish-consumer-sentiment-dips-slightly-on-tech-job-losses.html "Irish consumer sentiment dips slightly on tech job losses") is not good,” Genth said.

After two exceptionally strong years during the pandemic, online [retailing is experiencing a normalisation in sales](https://www.financedigest.com/uk-retailers-turn-positive-on-sales-hopes-after-bleak-winter.html "UK retailers turn positive on sales hopes after bleak winter"), with its first ever year-on-year sales decline forecast by the HDE – a nominal 2022 fall of 2.3%, or 7.2% in real terms.

The HDE saw silver [linings for the 2022 Christmas period in a relatively stable job market and the fact that 19% of consumers plan](https://www.financedigest.com/birmingham-lines-up-post-brexit-housing-plan-with-a-little-help-from-its-friends-in-china.html "Birmingham lines up post-Brexit housing plan, with a little help from its friends in China") to spend more than 300 euros ($301.92) on gifts, its survey of more than 2,000 people showed.

This was down from 23% in that [top price](https://www.financedigest.com/4-for-the-price-of-1-what-you-can-buy-in-the-uks-top-northern-cities-for-the-price-of-a-london-pad.html "4 for the price of 1: What you can buy in the UK’s top northern cities for the price of a London pad") bracket in 2021 and 2020.

Many European retailers have fought to keep prices low in an attempt to lure cash-strapped shoppers, with Dutch grocer Ahold Delhaize and Primark [owner Associated British Foods among those registering a boost in sales](https://www.financedigest.com/ikea-stores-owner-ingka-says-campaigns-help-boost-store-visits-and-sales.html "IKEA stores owner Ingka says campaigns help boost store visits and sales").

And with [Black Friday](https://www.financedigest.com/cost-of-living-crisis-casts-shadow-over-europes-black-friday.html "Cost-of-living crisis casts shadow over Europe’s Black Friday") approaching on Nov. 25, shoppers could rush for discounts.

However, Genth warned that economic difficulties could deny German retailers the luxury of being able to [offer discounts](https://www.financedigest.com/discount-dining-clubs-tastecard-and-gourmet-society-grow-their-offering-as-chimichanga-and-spaghetti-house-both-sign-up.html "Discount dining clubs tastecard and Gourmet Society grow their offering as Chimichanga and Spaghetti House both sign up").

In retail, we have absolutely nothing to give away these days because the [costs are rising](https://www.financedigest.com/fortum-says-rising-costs-of-nordic-power-trading-are-worrying.html "Fortum says rising costs of Nordic power trading are “worrying”") for us just as much,” he said.

($1 = 0.9936 euros)

(Reporting by Rachel More; Editing by Madeline Chambers, Kirsten Donovan and David Goodman)


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