No hunt for this red October…

German retail sales were unexpectedly weak in October. The ‘unexpectedly’ part is just as important as the ’weak’ part since Germans have been deluding themselves with a view of how this crisis is going to pass them by. Chancellor Merkel is disdainful of what she regards as competition over who can launch the largest stimulus plan and has in contrast to much of the rest of the world continued to sit on the sidelines and watch as Germany’s economy unravels. Retail sales in Germany are steadily and progressively deteriorating. Real ex auto sales are down at a 3.9% annual pace over three months compared to a -2.2% pace over six months and -1.4% over 12-months. What is the surprise there? Why should that sequence of growth rates, that is so very well-behaved, be called ‘unexpected?’ Sales had risen by a strong 2.1% in August and after a rise of 0.3% in July. But September and October sales now tell a different story and one that is consistent with the world surrounding the German economy as well. The progression of growth rates shows the August ‘burst of strength’ to have been a false signal. Real and nominal series tell pretty clear stories if anyone is watching. Now Germany’s auto sector is getting hit harder as short hours are being planned.