Germany: Inflation tames retail sales

Bloomberg News reported that German retail sales for April were disappointing for the second month in a row. Retail sales growth is negative in Germany, adjusted for inflation.The reason: inflation. Consumers in Germany are losing spending power as inflation erodes the value of their earnings.

Sales, adjusted for inflation and seasonal swings, fell 1.7 percent from March, when they dropped 2.2 percent, the Federal Statistics Office in Wiesbaden said today. Economists forecast a gain of 0.6 percent, the median of 29 estimates in a Bloomberg News survey shows. In the year, sales fell 1 percent.

The German economy is losing momentum as faster inflation erodes consumers’ spending power just as companies grapple with a global slowdown. The country’s economy had grown the most in 12 years in the first three months of the year, driven by investment and exports. At the same time, consumers increased savings.
–Bloomberg News, 30 May 2008

This is the situation across the world as commodity price inflation takes hold. The hope is that inflation will recede. If it does not a classic wage-price spiral could bring the inflation genie out of the bottle for the long term.