German retail sales fall in blow to Schulz

A SURPRISE fall in German retail sales has dealt a blow to Chancellor Olaf Scholz as he tries to steady the economy in the face of rising inflation.

Consumers felt the pinch of higher prices, particularly for food, as retailers were hit by supply problems from Covid lockdowns in China.

The Federal Statistics Office said retail sales were down 5.4pc last month, a much steeper fall than the 0.2pc predicted by Reuters.

Grocery retailers posted a decrease of 7.7pc in April compared to March, the biggest month-on-month drop since the series began in 1994.

Trade in textiles, clothing, shoes and leather goods, as well as department stores and sales outlets, performed much better than last year, when the government had imposed closures to prevent the spread of Covid.

However, they still recorded significant drops from March 2022.

German inflation rose to 8.7pc, its highest level in nearly half a century in May on the back of energy and food prices, fuelled by the war in Ukraine and supply chain woes.

The higher-than-expected reading added to pressure on the European Central Bank as policy makers consider how rapidly to raise interest rates from record lows.

Some 80pc of German retailers surveyed in May said they would not receive all the goods they ordered as lockdowns in China exacerbate supply problems, the Ifo institute said.

Klaus Wohlrabe at the Ifo said: “Many goods are not on the shelf, but are sitting in a container at a port in China.”

The DAX index closed 0.3pc lower yesterday.

Earlier yesterday, Mr Scholz said he wants to organise “concerted action” with employers and labour unions to address rampant inflation and prevent excessive wage hikes from further pushing it up.