DIRECT MARKET REPORT GERMAN RETAIL - Europe Real Estate

2 Destatis
3 Federal Statistical Office
Retail sales growth
In first instance it looked that the 3% increase in VAT from the 1st of January
2007 didn’t have that much of a negative consequence on consumer spending.
However, in May it decreased by 3.7% y-o-y in real terms, which was well below
the previous forecasts. A portion of this decline can be attributed to bad weather
conditions, the extraordinary high retail sales in May 2006 (+ 4.1% in real terms) 2
but also to the fact that German retailers indeed are still suffering the effects of
the VAT increase. Nevertheless, this entails recognising that a recovery in
consumer spending might take longer than expected.
As we can see in exhibit 6, retail sales seem to have had a small spike in April
2007, and apart from that they are down in the first half of 2007 over the 2006
level (0.8% over six months).
Exhibit 6 Retail sales per month (2006-2007 ytd)
Source: Federal Labour Office
In September 2007 turnover in retail trade was in nominal terms 1.2% 3 and in
real terms 2.2% smaller to that of the corresponding month of the previous year,
taking into account the number of days open for sale (25 in September 2007 and
26 in September 2006). When adjusted for calendar and seasonal variations
(CENSUS-X-12-ARIMA), the September turnover was in nominal terms 2.6% and
in real terms 2.3% larger than that of the preceding month. Compared with the
corresponding period of the previous year, retail turnover was in the first nine
months 2007 in nominal terms 0.9% and in real terms 1.6% smaller than that in
the first nine months of 2006. We actually had hoped that due to the improving
labour market the VAT effect would have been mitigated by now.
Looking back further in history one is able to overlook both absolute and relative
growth in time (exhibit 7).
German retail update - 28/11/2007 9