Retail sales are expected to increase by two percent this year. But the good economic situation is not reaching everyone, according to the HDE.

Only 30 percent of the companies surveyed by the trade association expect rising revenues in the first half of 2019. In the previous year it was still 37 percent. Smaller retailers in particular are dissatisfied with the business situation. Irrespective of the economic situation, they often rate their financial results as above average. This is threatening for the diversity in the inner cities. Companies with fewer than five employees account for 54 percent of all retail locations in Germany. HDE Managing Director Stefan Genth: “Small and medium-sized businesses need political support in order to survive in the current structural change and to benefit from digitalisation”. Genth sees a need for reform above all in corporate taxation and the costs of the energy revolution, which in his opinion should be financed by a CO2 price. In addition, the trade association calls for further expansion and maintenance of the road network and local public transport in view of the overburdened infrastructure in many places. Thus the supply of the customers and business can be secured also in the future.

The economy is better than the mood in the retail sector

Overall, corporate sentiment is gloomier than actual market data and the economy would suggest. According to HDE forecasts, retail sales will rise by two percent to just over 537 billion euros this year. But here the gap is widening. While the stationary retail sector is expected to grow by a nominal 1.3 percent, the online sector is expected to grow by an impressive 8.5 percent. This means that the strong growth in the Internet will continue, even if the overall growth rate is somewhat lower than in the previous year (9.1 percent). This difference between traditional retail and online business is also confirmed by a look at the details of the survey on the economy. In the retail sector, 35 percent of the companies surveyed expect their sales to decline. In online multichannel retailing, the figure is only 11 percent. Almost two thirds of those surveyed, on the other hand, expect an increase in turnover.

Consumer sentiment clouds over

The good situation on the labour market is regarded as the main driving force behind the economy and the rising sales in the retail sector. However, dark clouds are also gathering here. The current HDE consumer barometer shows a clouding of consumer sentiment in May. “Consumers are increasingly being impressed by the falling economic forecasts,” continues Genth. He demands: “The domestic economy and consumption must be strengthened as an anchor of stability for the economy as a whole in view of the weakening export and production figures. According to the HDE Consumption Barometer, the main reasons for the slowdown in consumer sentiment appear to be the decline in propensity to buy and lower income and economic expectations. These worsened expectations even reach a new low due to the significantly more pessimistic macroeconomic outlook.

 

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Link: The German Retail Association (Handelsverband Deutschland) gives an outlook on the sales expectations of retailers.

Image: ECE

//KH