German consumers spread the Christmas cheer
21 December 2004 , BERLIN - German consumers are turning out in force this Christmas stirring hopes that the nation's unexpectedly strong Yuletide spending spree will ensure a prosperous start to the New Year. Coming in the wake of a protracted slump in private consumption, Europe needs Germany's comparatively well-heeled consumers to open their wallets this Christmas to offset the impact of the strong euro and slowing global growth in exports. Setting the stage for the run-up to the last days of Christmas
21 December 2004
BERLIN - German consumers are turning out in force this Christmas stirring hopes that the nation's unexpectedly strong Yuletide spending spree will ensure a prosperous start to the New Year.
Coming in the wake of a protracted slump in private consumption, Europe needs Germany's comparatively well-heeled consumers to open their wallets this Christmas to offset the impact of the strong euro and slowing global growth in exports.
Setting the stage for the run-up to the last days of Christmas shopping, Hubertus Pellengahr, spokesman for Germany's Retail Federation, declared last Saturday "super Saturday". Consumers stormed shops throughout the country spreading a little festive cheer among the country's hard-pressed retailers.
"For many, it was the best sales day of the year," Pellengahr said.
Sales are growing as the countdown to Christmas gains momentum and Pellengahr predicts a 1.3 percent rise in Christmas business for German retailers compared to last year.
This could mean Christmas sales leaping by EUR one billion to an estimated total of EUR 70 billion with consumers splashing out especially on MP3 players, mobile phones, camera, flat-screens and winter clothing.
The latest official data show a 2.3 per cent surge in German retail sales in October with the GfK research group forecasting increased consumer confidence in December after shoppers' willingness to spend rose to a three-year high, paving the way to a solid start to 2005.
This also comes in the wake of unexpectedly strong German production and factory orders which have fuelled expectations of a more upbeat end of year after growth amounted to a meagre 0.1 per cent in the three months to the end of September as high oil prices undercut economic expansion.
Germany's car industry association is also predicting a rise in the nation's auto sales next year for the first time since 1999.
But Pellengahr says the last-minute surge in Christmas sales has come too late to save the retail business for 2004 with the retailers' federation expecting a sales drop of 0.5 percent.
Pellengahr believes, however, that the festive shopping rush will lay the foundation for an improved 2005. January sees the introduction of tax cuts totalling EUR 7.5 billion and should give consumers extra spending power.
Nevertheless, economists remain cautious about the outlook for the German economy as it enters 2005 and are tipping that the nation's growth will slide back to about to 1.5 percent or lower next year after coming in about 1.8 percent in 2004.
Considering the current low level of private consumption in Germany, Rainer Guntermann, senior economist with the investment Dresdner Kleinwort Wasserstein, believes that the potential for private consumption, which accounts for about 60 per cent of Germany's gross domestic product, is on the upside.
He said it could grow by about half percentage point next year and warns, "When considering expectations for the domestic economy it would be best to argue for caution," he said.
But apart from Germany's fragile labour market, overhanging private consumption has been the recent run of very low wage growth. Economists expect wages to rise by less than 2 percent in 2005, which is roughly in line with inflation and could dampen consumer spending.
This has been compounded by a string of high profile pay deals in which workers have accepted zero wage growth in exchange for job security and more working hours in many cases.
In addition, one poll showed that 62 percent of Germans had no plans to make major purchases. This was not for economic reasons but because they did not need anything.
Subject: German news