German retail forecasting slow recovery
Consumer confidence still fragile
March 9 2004
German retailers are finding it hard to see much light at the end of the tunnel after two years of declining sales.
The German Retail Association has predicted that sales would rise by just 0.6 per cent this year. However, even that will be an achievement in an economy which has saw retail sales decline by 2 per cent in 2002 and 0.9 per cent in 2003.
Germany, once the consumer powerhouse of Europe, is still suffering from high unemployment, as well as unrest over the taxes needed to support high levels of social benefits.
As a result, the GRA is forecasting continued weak consumer demand in spite of predictions that the German economy as a whole should grow this year. The recovery is likely to help German exporters more than domestic retailers, believes the association.
GRA president Hermann Franzen said: “Stagnation has become a long-term phenomenon said in a statement. Retail sales reflect this.”
Along with concern over an unemployment rate running at of 11.1 per cent, uncertainly over government tax plans has left consumers guarded about their disposable income.
Franzen said a public debate in December over Chancellor Gerhard Schroeder’s plans to cut state spending came at the worst possible time. “The fierce political controversies about the necessary reforms deeply unsettled consumers up until shortly before Christmas and presented retailers with a completely unsatisfactory Christmas season.”
Germany was the first European country targeted by Wal-Mart, the world’s biggest the retailer, which acquired a supermarket operation in 1998. However, in a German retail landscape characterised by the success of hard discounters such as Aldi and Lidl, even Wal-Mart has found the market tough going.
