News Column

Euro Debt Crisis Seen Adversely Affecting Spending Mood of Germans

Dec. 26, 2012

Die Welt Website

Text of report by right-of-centre German newspaper Die Welt website on 22 December

[Unattributed report: "Euro debt crisis unnerving the consumers - GfK consumption barometer falls to lowest level since December 2011 - fear of job losses could increase - citizens nevertheless expect income increases above the current inflation rate of nearly 2 Per cent"]

The debt crisis is increasingly ruining the buying mood of the Germans. The Gfk [Company for Consumer, Market, and Sales Research] barometer of the consumer climate declined by 0.2 per cent in January to 5.6 per cent and fell with the third consecutive decline to the lowest level since December 2011. "The unnerving of the consumers through the international economic headwind is continuing at the end of 2012," the GfK experts explained.

The HDE [Main Association of German Retail Trade] reacted calmly and is sticking with its forecast of better Christmas business. Merchants and market researchers see a solution to the euro debt crisis as a critical issue for 2013. "If this does not succeed, consumption will also be facing a difficult year," GfK expert Rolf Buerkl warned.

In the GfK poll, the Germans assess their future finances better than in the recent past, but they are looking soberly at the sluggish economy. "The consumers assume that the German economy will go through a difficult phase in the coming months," Buerkl said. The Bundesbank and institutes are forecasting a shrinking of the economy in this quarter. The Ifo-index, however, signalled that the enterprises will again experience an upswing in 2013 after a hard winter half-year.

Because of the good situation in the labour market and the prospects of higher incomes, private consumption was long considered a bulwark against the debt crisis. In the third quarter, wages and salaries of workers were about 3 per cent above the level of one year ago and had risen more strongly than they had in more than a year. The citizens are counting more than before on higher incomes. This GfK partial index increased by 3.2 points to 21.2, although in June it was about twice that high. According to Buerkl, the consumers no longer assume that their incomes "will develop with the dynamics as they have until now." Rather, in the coming months, they expect increases in income above the inflation rate, which is currently nearly 2 per cent. Nevertheless, the Germans' spending mood declined to the lowest level since May 2010, as the barometer for the inclination to purchase things shows. The GfK spoke of a "good" level as before.

In the next months, Buerkl expects a "little dip in consumption." He stressed, however, that company announcements of layoffs could increase the fear of lost jobs. "Experience shows that that always curbs consumption."

This may have hardly any influence on Christmas sales. The HDE continues to expect sales of about 80 billion euros - that would be 1.5 per cent more than in 2011. "That is not a warning signal for consumption," a spokesman of HDE said about the GfK index. Just recently the German mail-order firms raised their forecast for their Christmas business to 8 billion euros. This would be an increase of about 17 per cent. The boom in the Internet trade may continue. After an increase of 13 for all of 2012, the HDE expects growth of 12 per cent for next year.

Positive signals also came recently from different enterprises. The postal service is currently delivering as many as 7 million packages daily, according to chief Frank Appel. "Never before have we delivered as many packages as we have so far in 2012," Appel says. The retailer Douglas speaks of a good level of consumption: "We - just as many merchants - continue to expect the Christmas business to be stronger than last year."

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Source: (C) 2012 BBC Monitoring European. via ProQuest Information and Learning Company; All Rights Reserved

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