German Retail Sales Slide by 0.8% to Fan Recessionary Fears

Highlights

• German retail sales fell by 0.8% in July, defying economists’ forecast of a 0.3% increase.
• The August German GfK Consumer Climate Survey revealed negative sentiments towards income, economy, and unemployment.
• A consecutive decline in retail sales leaves Eurozone inflation to force the ECB into a September rate hike.

German Retail Sales Stumble for a Second Consecutive Month

After stickier-than-expected German inflation numbers from Wednesday, retail sales were in focus this morning. A sharp pickup in retail sales would support a September ECB rate hike.

However, German retail sales tumbled by 0.8% in July, following a 0.8% slide in June. Economists forecast an increase of 0.3%. Retail sales were down 2.2% year-over-year versus -1.6% in June. Economists forecast retail sales to fall by 1.0% year-over-year.

The retail sales numbers aligned with the German GfK Consumer Climate Survey. On Wednesday, the August survey revealed negative sentiment toward income, the economy, and unemployment. Negative consumer sentiment toward unemployment and income weighs on consumer spending and eases demand-driven inflationary pressures.

EUR/USD Reaction to German Retail Sales

Before the retail sales figures, the EUR/USD rose to a pre-stat high of $1.09398 before falling to a low of $1.09168.

However, in response to the retail sales figures, the EUR/USD rose to a post-stat high of $1.09190 before falling to a low of $1.09134.

This morning, the EUR/USD was down 0.08% to $1.09144.

Up Next

The French economy will be in the spotlight ahead of the all-important Eurozone inflation numbers. We expect investor focus to remain on inflation, with hotter-than-expected inflation figures for France and the Eurozone likely to add pressure on the ECB.

However, investors need to consider US economic indicators later in the session. US Core PCE Price Index and personal spending figures will influence investor sentiment toward the Fed. A more marked increase in the Core PCE Price Index and better-than-expected US personal spending figures would refuel bets on further Fed rate hikes.

Beyond the numbers, the ECB will be in the spotlight. The ECB monetary policy meeting minutes and ECB member commentary will draw interest. ECB Executive Board members Isabel Schnabel and Luis de Guindos are on the calendar to speak today.