German retail sales plunge in December

Germans tightened their purse strings at the end of 2022 in response to the higher cost of food and energy.

According to the Federal Office of Statistics, in seasonally adjusted terms, retail sales turnover plummeted at a month-on-month pace of 5.3% in December.

That was a far worse outcome than the 0.2% rise penciled in by economists.

In comparison to a year ago and also in inflation-adjusted terms turnover fell by 6.4%.

Gross domestic product figures for the fourth quarter released the day before had hinted at very weak consumption at the end of the fourth quarter.

GDP growth declined by 0.2% over the last three months of the year relative to the prior quarter, instead of the unchanged reading anticipated by economists.

Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, noted how nominal spending also fell in December, by 4.8% on the month, so that in his opinion the drop wasn't just a function of higher prices.

Vistesen's forecast was for another fall in GDP during the first quarter of 2023 as a result of an inventory correction, weakness in the auto sector and a decline in consumer outlays on the back of "sharply higher" wholesale gas prices in the back half of 2022.

An aggressive European Central Bank was now a risk to his forecast for a stable recovery in GDP from the second quarter onwards, he added, while China's reopening was an upside risk - although it might add to price pressures.