The mood in German retail fell in February. The business climate index measured by the Munich Ifo Institution slipped to -27.7 points in the second month of the year, from -24.1 points in January. Companies judged their current situation more cautiously than in the previous month, and business expectations remained dim. “Retailers have started the new year rather conservatively” said Ifo expert Patrick Höppner. “If geopolitical risks continue to linger and energy prices rise, consumer sentiment could be dampened, adding further pressure on retailers”.
In February the sentiment cooled further in several retail sectors, notably furniture stores and clothing retailers. In contrast, grocery retail and car dealerships saw a slight improvement. Firms submitted their assessments before the recent escalation of conflict in Iran at the end of February.
“Hedging a broader view, the overall retail mood remains largely gloomy for both wholesalers and retailers” Höppner said. “This is evident when comparing the business climate across industries: retailers judge their current situation less favourably than firms in manufacturing, services, or construction. Their business expectations are also particularly pessimistic”.
More retailers, in total, planned to raise prices in the coming months in February. Furniture stores and grocery retailers are somewhat more likely to anticipate price increases than retailers overall. At the same time, retailers are more inclined to reduce employment than to expand it, which explains why the labour shortage has recently eased somewhat in the sector.
