New data has revealed the impact of the coronavirus lockdown on German retail sales in March. As shops were forced to close in Europe’s largest economy to slow the spread of the virus, retail sales dropped by 5.6%, making it the sharpest decline since January 2007. Although the decline was smaller than anticipated, analysts had predicted a decrease of 7.3%. On a year-on-year basis, retail sales fell by 2.8%.

In the previous month, retail sales had actually surged as households stockpiled in anticipation of the lockdown. This is a common reaction during times of uncertainty. However, the closure of non-essential stores was partially offset by higher sales in supermarkets and chemists, which remained open during the lockdown. These sectors helped to cushion some of the losses experienced elsewhere in the retail industry.

The pandemic has had a significant impact on Germany’s economy, prompting the country’s economy minister to warn of the deepest recession since World War Two. As a result, the government has revised its GDP growth estimate for 2020 from +1.1% to -6.3%. The hope is that the recession will reach its lowest point in the second quarter and that economic activity will gradually recover thereafter, as long as there is no second wave of infections.

While some shops have now reopened, there remains cautious optimism that the retail sector will slowly begin to recover. However, due to ongoing uncertainty regarding the pandemic and the potential for further disruptions, it is unclear when Germany’s retail industry will fully return to normal.

Useful links:
1. DW News: German retail sales drop by 2.8% in March from a year ago
2. Bloomberg: German retail sales post biggest drop in over a decade