German retail sales rise despite consumer caution

German retail sales experienced a modest increase in the first half of 2026, achieving a 0.7% real growth compared to the previous year. This occurred despite consumers showing reluctance to spend due to escalating prices. Nominal sales, which include price increases, saw a more significant rise of 2.2%.

While May saw a stronger-than-initially-reported real sales increase of 1.2%, June experienced a downturn. Sales in June decreased by 1.1% in real terms and 1.2% nominally compared to May 2026. This fluctuation reflects the broader economic trend of subdued private consumption, a key driver of the German economy.

Rising inflation, which stood at 2.8% in July, continues to erode purchasing power, meaning consumers can afford less with the same amount of money. A survey by the Ifo Institute indicates that over half of retailers (54%) found demand insufficient in July. Although expectations have improved for the third consecutive month, the overall sentiment in the sector remains pessimistic, described as "worse than before the escalation of the conflict in Iran at the end of February."

Many retailers hold a very cautious outlook for the remainder of the year, suggesting that the challenges of inflation and cautious consumer spending will likely persist.

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The mood in the industry is still 'worse than before the escalation of the conflict in Iran at the end of February.'