German retail sales collapse in July as fuel discount expires

• Germany's retail sales for July came in at -3.4% month-on-month, far below the +0.4% expected.
• The prior month's figure was revised upward from -0.7% to 0.0%.

Another round of disappointing German economic data has arrived, reinforcing a familiar pattern. The latest reading is particularly weak, though it is somewhat tempered by an upward revision to June's numbers. Even so, it marks a dismal start to consumer activity in the third quarter.

When adjusted for inflation, German retail sales in July fell by 2.5% compared with the same month last year. That represents a sharp decline from June, when the year-on-year figure stood at a 0.6% increase.

Breaking down the figures, the steep drop in July coincides with the conclusion of a fuel discount that had been in place during May and June. Notably, sales at petrol stations fell sharply by 9.1% in real terms on a monthly basis. Although petrol station sales include transactions at station shops, the influence of the fuel discount is clearly the primary driver behind the slump.

Beyond that, food sales slipped by 0.8% in real terms month-on-month, while non-food retail sales also registered a significant decline of 4.8% in real terms over the same period.

Overall, the data paint a uniformly grim picture, suggesting that households pulled back on spending in July.