German retail sales rebound as consumers stock up essentials
Online retailers continue to benefit from shiting consumer habits with a jump in sales for food and furnishings
German retail sales rebounded more than expected, data showed on Wednesday, as consumers stocked up essentials before a second partial lockdown to contain the coronavirus.
Online retailers continued to benefit from shiting consumer habits with a strong jump in sales, which came at the expense of clothing and shoe stores and they suffered further losses.
Germany’s restaurants, entertainment venues and gyms have been closed since November 2 in an atempt to slow the pandemic’s spread. Schools, factories and shops remain open with social distancing conditions.
Retail sales - a notoriously volatile indicator oten subject to revisions - rose 2.6% month on month and 8.2% year on year in October in real terms, the Federal Statistics Office said. Both figures beat Reuters forecast.
The month on month data followed an upwardly revised drop of 1.9% in September and, compared with February - the month before the pandemic started in Germany - sales were 5.9% higher.
Demand was particularly strong for food, furnishings and household appliances.
The strong food sales could have been due to expectations of renewed lockdown measures which means more consumers are having meals at home, said economist Oliver Rakau from Oxford Economics.
Non-essential retail sales were likely to tumble, but online sales should hold up well, he added.
The beter-than-expected retail sales data followed bullish job market data which showed on Tuesday that unemployment fell further in November despite the partial lockdown.
But a gloomy consumer sentiment survey released by the GFK institute last week suggests the resilient labour market will not automatically translate into higher household spending at the end of the year.
Economic institutes expect Germany’s gross domestic product to shrink by about 1% in the fourth quarter ater a stronger-than-expected 8.5% rebound in the third and an unprecedented 9.8% plunge in the second quarter.
Germany plans to almost double the borrowing it had planned for next year to finance emergency aid for businesses during the second wave of the COVID-19 pandemic, Finance Minister Olaf Scholz said on Friday.
The parliamentary budget commitee agreed to a debt figure of almost 180 billion euros ($215 billion) - the second largest amount of net new borrowing in the history of post-war Germany.
“Our goal is to overcome this pandemic and grow out of it with full strength next year,” Scholz said during a virtual news conference, adding that the stimulus package for this year and next would result in new debt of more than 300 billion euros.
“We know that these are exceptional budgets in 2020 and 2021,” said Scholz. He added that the budget provided for financial support to be extended until June 2021.
The new debt approved for 2020 will “by far” not be exhausted, said Scholz, and much will be postponed until next year.
Germany will extend and tighten a partial coronavirus lockdown and keep bars, restaurants and entertainment venues shut until at least Dec. 20.
Chancellor Angela Merkel has suggested that the restrictions may well extend into early next year if infection numbers don’t fall significantly.
“The high debt is necessary to bring our country safely through the pandemic,” said Eckhardt Rehberg, a lawmaker of Merkel’s Christian Democrats (CDU). “We must once again make use of the exemption rule from the debt brake.” Enshrined in the constitution, the brake restricts the issuance of new debt by limiting the federal budget deficit to 0.35% of economic output. Parliament suspended it this year in light of the pandemic.
Merkel’s government has already taken unprecedented steps to help companies and small businesses get through the crisis, freeing up billions of euros to soten the pandemic’s impact on the economy.
The planned new debt of 179.82 billion euros for 2021 compares to 96 billion euros initially envisaged by Scholz in September.
Economy Minister Peter Altmaier, speaking during the same news conference as Scholz, said he did not expect lockdown measures to produce a “major wave” of insolvencies in the last two months of the year given businesses can draw on financial lifelines.
“I believe that for the sectors primarily concerned; we have - through the November and December aid - created a possibility for the economic consequences to remain within manageable limits,” he said.
The government expects the economy to shrink by a calendar-adjusted 5.9% in 2020 and rebound by 4.4% in 2021.