German retail sales rebound more than estimated

Retail sales in Germany rose by 1.0% month-over-month in June 2025, comfortably surpassing market expectations of a 0.5% increase and reversing a downwardly revised 0.6% contraction recorded in May.

This marked the first monthly gain since March and provided a welcome sign of resilience in Europe’s largest economy, which has been grappling with stagnant industrial output and soft consumer sentiment in recent quarters. The rebound was broad-based, with sales increasing in both food-related categories (+0.3%) and non-food segments (+1.8%), indicating a balanced pickup in household spending.

Online retail stood out as a major driver of growth, with digital sales jumping by 9.0% month-over-month—highlighting the sustained shift in consumer behavior toward e-commerce channels, especially for clothing, electronics, and home goods. Seasonal promotions and improved logistics capacity likely contributed to the surge, as did pent-up demand after months of weak activity.

On a year-over-year basis, the figures were even more striking. Retail sales surged 4.9% compared to June 2024, up sharply from a revised 2.6% rise in May and marking the strongest annual growth since February 2022. The acceleration was supported by robust performance in both key retail categories: food sales advanced by 0.9%, while non-food sales leapt by 7.4%, underscoring growing consumer confidence and a broader recovery in discretionary spending.

Online retail continued to outpace traditional channels, soaring by 20.4% year-on-year, reflecting both structural trends and short-term tailwinds such as aggressive discounting and faster delivery cycles.

The positive sales data suggests that German consumers are gradually regaining confidence, helped by easing inflation, steady wage growth, and a resilient labor market. Real income gains—combined with receding fears of recession—appear to be restoring purchasing power, particularly among middle-income households.

However, economists remain cautious about the sustainability of the rebound, noting that ongoing geopolitical tensions, elevated interest rates, and uncertainty around future energy prices could still weigh on consumption in the second half of the year.

Nevertheless, the June retail figures provide an encouraging signal for Germany’s Q2 GDP outlook, as private consumption remains a key component of domestic demand. If consumer momentum persists, it could help offset some of the weakness in manufacturing and exports, offering a more balanced path to recovery for the German economy.