Business Climate in German Retail Remains Gloomy
The ifo Business Climate in Germany’s retail deteriorated in February for the third consecutive month, finds the latest ifo Institute survey. The indicator for assessments of the current business situation fell to -18 points, down from -15.2 points* in January. Expectations improved only slightly, with the indicator remaining at the low level of -36.7 points. “The economic environment remains very challenging for retailers,” says ifo expert Patrick Höppner. “Consumers are holding back on shopping, which is putting a strain on retailers’ businesses.”
Due to weak demand, inventory remains too high at many retailers. In the coming months, car and clothing retailers in particular are planning to increase their prices less frequently. Prices are expected to continue to rise in food retail, with only bicycle dealers planning price reductions. Moreover, fewer businesses are planning to hire new staff in the months ahead. “In addition to the difficult demand situation, the faltering collective bargaining negotiations are also unsettling many retailers. This could further reduce their willingness to hire, even if the overall demand for skilled workers remains high,” Höppner says.
Retailers of consumer electronics, electrical goods, and electronic household appliances see their situation as more positive than in the previous month. The same applies to drugstores. “Drugstores are still enjoying the positive tailwind from 2023, and the signs for 2024 are good. In the case of products that are sold in both drugstores and supermarkets, the drugstores appear to be gaining additional market share,” Höppner says. In contrast, the business situation has deteriorated for furniture stores, DIY stores, and bicycle dealers.
*Seasonally adjusted
