Poor mood

Retail plunges deeper into crisis again

After a slight spring awakening and more sales, the trend in retail is currently deteriorating again. Consumers are more reluctant to store and, according to the Wifo report, are continuing to put more money aside to save.

The poor economic situation continues to cause retailers to worry. "Retailers still achieved slight sales growth in the second quarter, but this cannot compensate for cost increases in procurement, personnel, borrowed capital and rents," says Rainer Will, head of the retail association. In addition, many fashion retailers are currently selling out. Although this increases footfall in some cases, it hardly generates any income.

Consumers are saving more due to uncertainty
The assessment of the situation shows a gloomy picture; retailers were probably still too optimistic recently. However, due to the high level of uncertainty, higher household incomes are predominantly being saved. According to Wifo, the savings rate remains high at 9.8 percent.

Nevertheless, at least some retail sectors are on a slight upswing again, such as sports retail, which can also rely on the major events (European Championships and Olympics) this summer. On the other hand, furniture retailers, which already lost over ten percent in 2023, and electronics retailers continue to have major problems.

Sales growth is nowhere near enough to compensate for the cost increases.

Rainer Will, Handelsverband

Despite the overall weak development, retailers are looking for numerous employees, even if vacancies are declining. 10,670 jobs are currently vacant, the majority of which are in the crisis-proof food retail sector.

"Reducing working hours will not work"
Will does not believe in reducing working hours due to the need for skilled workers: "Demanding a reduction in working hours in times of economic downturn is like fighting the climate crisis with more CO₂ - it won't work," says the lobbyist.

Even in the near future, the economy is unlikely to recover at a rapid pace. The economic downturn is likely to drag on into the second half of the year. In 2025, there should also be moderate growth in consumption. However, inflation is likely to normalize. After 3.4 percent this year, Wifo expects a rate of 2.5 percent in 2025.

Inflation remains too high
However, this is still too high; the EU average inflation rate has already reached 2.5 percent. Some increased costs also persist, especially when contracts for energy or rent have longer terms in some cases.