German retail sales are likely to fall for the third consecutive year in 2004 as fears over job uncertainty and planned benefit cuts weigh on consumers, the country's HDE retail association said today.
HDE forecast a drop in retail sales of 0.5 per cent compared with 2003, revising its earlier prediction of a rise of 0.5 per cent.
"Our 2004 forecast of a 0.5 per cent rise in turnover can no longer be achieved. Declines in the first half are too heavy a burden," HDE president Mr Hermann Franzen said in a statement.
Germany's recovery this year has been driven by surging exports while domestic demand has remained the economy's Achilles' heel and the main obstacle to sustained growth.
A slight pick up in sales of around one third of a per cent in the last half of the year should limit the retail sales drop to 0.5 per cent for the full year, Mr Franzen said.
According to Germany's national statistics office first-half retail sales dropped by 1.4 per cent in real terms and 1.5 per ent in nominal terms.
Consumer spending, which accounts for some two thirds of gross domestic product, has stagnated due to high unemployment and fears about the impact of unpopular new benefit cuts which come into effect in January.
Chancellor Gerhard Schroeder's reforms have already hit disposable income through a freeze in pensions and charges for visits to the doctor.
"Discussions about necessary cuts have led to a chronic gloom among consumers," Mr Franzen said, adding retailers had also made life difficult for themselves by expanding shop-floor space and excessive price competition.
HDE, which groups about 100,000 member companies, forecast Germany's retail sector would shed 35,0000 jobs in 2004, after cutting 50,000 jobs during 2003.