Rolf Bürkl, Senior Research Consultant Business & Technology, GfK Marktforschung, responsible for the GfK consumer climate surveys
Germany has recovered from the financial and economic crisis with impressive speed. Whereas gross domestic product (GDP) in the crisis year 2009 shrank by 4.7% and the country experienced its worst recession since the second world war, GDP shot up by 3.6% last year – the strongest rise recorded since German reunification. GfK’s consumer climate surveys reveal that at the same time that economic researchers upgraded their forecasts, consumers’ economic expectations also embarked on a steep upward trend from summer 2010 onwards. The upswing had a very positive effect on the labour market. According to the German Federal Employment Agency, the number of unemployed people averaged 3.244 million across 2010 as a whole and was therefore 5.2% down on the prior year. In autumn 2010, the figure fell below the psychologically important three million mark, and this positive trend in the labour market gave a decisive boost to consumers’ confidence in their personal financial and professional futures.
Among consumers, a sustained trend towards quality and away from low prices as the sole focus can be observed.
Income expectations also rose considerably over the course of 2010. The indicator climbed from 12 points in January to 40 points in December, almost reaching the high that was recorded in 2000 and 2001. German consumers expected the upturn to have a significant positive effect on their salaries, and the most recent wage agreements confirm this expectation. The favourable environment and increasing planning certainty for consumers also had a tangible impact on the propensity to buy, which continued to rise steadily from an already high level. The average value of this indicator in 2010 was 27 points, which was six points higher than the already very satisfactory value in the previous year. Correspondingly, the GfK consumer climate index followed a continuous upward trend and reached a three-year high at the end of 2010/start of 2011.
According to GfK’s calculations, food retail outlets and chemists’ stores in Germany saw an increase in sales last year. With a rise of 1.2%, they achieved a sales volume of €154 billion, which is a new record high. The non-food segment – areas such as electronic goods, textiles, furniture and DIY – also recorded a marked improvement in sales. A climb of an estimated 2.6% and total sales of almost €148 billion were the best sales performance for the non-food segment since 2002. Technical consumer goods, including consumer electronics, IT, telecommunications products, the photographic segment and household appliances, enjoyed particularly strong growth of more than 8% to €47 billion.
Among consumers, a sustained trend towards quality and away from low prices as the sole focus can be observed. One example is the textile retail segment. Last year, the industry achieved a sales volume of around €40 billion, with sales value growth of 2.4% and a slight decline in sales volume. On average, consumers spent more on each purchased item and tended to opt for higherquality products.
Germans’ optimism with regard to consumption further increased at the beginning of 2011. The propensity to buy climbed to a value of 41.8 points in January – the highest level since December 2006 – in spite of the recent rise in price expectations. The positive labour market outlook is further improving consumer sentiment.
GfK expects consumer spending to increase considerably, by 1.5%, in 2011 and to triple its growth rate compared with the previous year. The new propensity to consume that observed among Germans is not only adding stimulus to the economic upturn, but is also becoming a sustained and reliable source of support for the domestic economy, according to GfK’s researchers.
Germany is currently in an exceptional position in comparison with other European countries. The upturn is not only giving a boost to companies, but has also led to sustained improvement in consumer sentiment. Whereas Germans might previously have been considered panic savers and extremely price-sensitive consumers, they are now increasingly focused on quality and are happy to spend money. Since last year, German consumers have been the optimists of Europe. Private consumption has become a vital source of support for a sustained economic upturn.