Retail sales in Germany fell by 1.6 percent in real terms compared to April. This marks a more profound monthly decline than the revised figure of minus 0.6 percent in April, pointing to a possible softening in consumer momentum. Sectorally, non-food retail was hit hardest, dropping by 2.2 percent, while food sales also slipped by 1.3 percent, suggesting growing caution in both discretionary and essential spending.

Despite the monthly slowdown, the year-over-year picture remains more positive. Total retail sales rose 1.6 percent compared to May 2024, with non-food and food retail posting modest annual gains of 2.0 percent and 0.5 percent respectively. Online and mail-order retail stood out, recording a robust 9.3 percent year-over-year increase, underscoring the continued shift in consumer habits toward digital shopping.

In essence, while the monthly contraction signals some near-term fragility, possibly influenced by economic uncertainty or seasonal variations, the steady annual growth, especially online, suggests that consumer demand remains resilient. Policymakers and retailers may need to closely monitor the upcoming months to determine whether this is a temporary dip or the beginning of a broader cooling in household consumption. These latest updates bring the RPI to 0 and the RPI-P to minus 1, meaning that economic activities are in line with the consensus on the German economy.

Sales expected to recover by 0.5 percent on the month after dropping 1.1 percent in April. Sales seen up 2.5 percent on year compared with 2.3 percent in April.

Retail sales measure the total receipts at stores that sell durable and nondurable goods. The data are compiled from about 27,000 retail businesses and are reported in both nominal and volume terms. Autos are excluded. A very limited breakdown of subsector performance is available in the initial report which is itself subject to sometimes sizeable revision but much greater detail is provided in the following month's release.

With consumer spending a large part of the economy, market players continually monitor spending patterns. Retail sales are a measure of consumer well-being. The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps auto sales are especially strong or apparel sales are showing exceptional weakness. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report. However, by excluding the services sector, changes in retail sales data can differ significantly from those in total household spending.