Germany's HDE retail industry association said on Wednesday it was sticking to its forecast of a slight nominal rise in retail sales this year but said it would need conditions to pick up in the second half. HDE President Hermann Franzen said the association would keep its forecast of a nominal 0.5 percent rise in retail sales in 2004 and a rise of about one percent in 2005 sales. In real terms, sales would stagnate this year and pick up only slightly in 2005, he added. "After the first four months, it will not be easy for the retail industry to finish the year with at least a slightly positive result," Franzen said at a news conference presenting the HDE's 2003/04 report. HDE Managing Director Holger Wenzel said sales would have to grow by two percent in the second half of this year to reach the 0.5 percent full-year forecast.
Private consumption accounts for about 60 percent of Europe's biggest economy and weak domestic demand has been one of the main factors behind the nation's economic stagnation over the past three years. A decline in retail sales over the first quarter of 2004 has scotched any hopes of a pick up in the first half of the year. German perfume retailer Douglas Holding posted a two percent rise in first half sales on Wednesday but said the increase had been fuelled by sales outside Germany and domestic business had stagnated.
IMPROVEMENT SCARCE
Franzen said preliminary indications suggested that sales in April had shown scarcely any improvement over the first quarter and May would probably not provide any impulse due to two fewer working days than the previous month. "Things are not well with our country," he said. "The economic situation is still completely unsatisfactory. Germany is not managing to produce any strong, self-sustaining growth." Last year German retail sales fell by 0.8 percent in real terms and were down 0.4 percent over the first three months of the year, evidence consumer demand remains muted. "Consumers are holding back because of concern about the future," Franzen said. "They don't trust the government to enact important reforms to the labour market, and the tax and social security systems. As long as this remains the case, consumption won't strengthen."
Wenzel said employment in the retail sector would likely post a smaller decline this year of about 20,000 after two "catastrophic years" in 2002 and 2003 when employment shrank by 32,000 and 57,000 respectively. The Paris-based Organisation for Economic Cooperation and Development trimmed its forecast for 2004 German growth on Tuesday to 1.1 percent from a 1.4 percent prediction made in November. The government recently trimmed its forecast to 1.5 percent from a range of 1.5-2.0 percent.///