German retail sales disappointed sharply in July, falling 3.4% m/m versus expectations for a 0.4% increase. This was a significant downside surprise, pointing to weaker private consumption. Moreover, Destatis revised the June reading to 0.0% m/m from the previously reported 0.7% decline. The weak data are not encouraging for equities and the valuations of companies focused mainly on the German market, although DAX and MDAX companies appear much less exposed to any further deterioration in domestic demand in Germany.

• The biggest drag came from petrol stations, where sales fell 9.1% m/m after a fuel discount that had been in place in May and June expired. On a year-over-year basis, petrol station sales were down 9.3%.
• The non-food segment also looked weak, with sales falling as much as 4.8% m/m.
• Also somewhat concerning, online and mail-order sales declined 5.6% m/m and 0.8% y/y.
• Real food sales fell more moderately, by 0.8% m/m and 0.3% year over year.
• Overall retail sales were 2.5% lower in July than a year earlier.

The data suggest that weakness in the German consumer remains an important issue for the economy. Part of the July decline was admittedly one-off in nature, linked to the expiry of the fuel discount, but the broad weakness in non-food retail and e-commerce shows that the pressure was not limited to fuel alone.