German Retail Sales Disappoint, Weakening Q3 Consumption Outlook

German retail sales plunged 1.5% in July compared with the previous month, far below the 0.4% decline expected, signaling a slowdown in domestic consumption and clouding the outlook for third-quarter growth.

• Germany’s economy contracted 0.3% in Q2, further dimming hopes for a sustained recovery in Europe’s largest economy.
• Analysts note that while foreign demand is under pressure from U.S. tariffs, private consumption was expected to support growth. Rising wages and low inflation suggested room for spending, but July figures disappointed these expectations.

Consumer sentiment and inflation:

• The GfK survey anticipates falling consumer confidence for the third consecutive month in September, reflecting worries about job security and inflation uncertainty.

Import prices:

• German import prices fell 1.4% year-on-year in July, slightly more than the 1.2% decline forecast, providing modest relief for cost pressures.

Overall, the data highlights weak domestic demand, raising concerns about Germany’s short-term economic momentum despite supportive wage and inflation conditions.