Before Christmas sales: the mood to buy brightens slightly

Status: 11/25/2022 10:26 am

Consumer sentiment has climbed for the second time in a row – but remains close to its record low. Consumers are hoping for inflation to be curbed and wage increases.

Shortly before the beginning of the hot phase of the Christmas business, the buying mood of the Germans stabilized further – albeit at a low level. The barometer for consumer sentiment in December rose by 1.7 to minus 40.2 points, as the GfK market researchers announced today in their monthly survey of 2,000 consumers. While the propensity to buy declined somewhat, the economic and income expectations of consumers improved slightly.

“This seems to have brought the consumer climate crash to an end,” said GfK expert Rolf Bürkl. However, as long as there are doubts about a problem-free energy supply and inflation remains high, the consumer climate will not recover noticeably and sustainably. Even after the second consecutive increase, the index remains close to the historic low of 42.8 points reached in October. Economists polled by Reuters had expected a slightly stronger increase.

Households face higher energy costs

“Consumers’ long-standing fears of exploding energy prices have eased somewhat, which is having a slightly positive effect on the consumer climate,” says Bürkl. Apparently, consumers assumed that government measures to cap energy prices could dampen inflation. Refueling has also recently become cheaper.

In addition, many Germans are counting on noticeable wage increases to limit their loss of purchasing power as a result of sharply rising prices. The wage increases recently agreed in the metal and electrical industry, for example, provide for a wage increase of 5.2 percent by June 2023 plus a further 3.3 percent from May 2024. There is also a one-time special payment of 3000 euros. In addition, the labor market remains stable, which ensures income security.

However, the willingness to make larger purchases – such as furniture or cars – decreased somewhat. “This continuing reluctance to consume is certainly due to the fact that many households will be faced with sharply increased energy bills in the coming months, for which they already have to put money aside,” the GfK market researchers explain this development. “These funds are missing for other acquisitions and purchases.”

Retailers expect worse business

In view of their customers’ loss of purchasing power due to high inflation, the majority of retailers are generally pessimistic about the Christmas business that is just beginning. According to a survey commissioned by the Federal Association of Consumer Organizations (vzbv), 63 percent of consumers in Germany said they were spending less money. Another 20 percent plan to do so.

According to the German Retail Association (HDE), 70 percent of retailers therefore expect the situation to be worse than last year. Despite the difficult environment, the industry association expects sales to increase by 5.4 percent to EUR 120.3 billion for the last two months of the year. Adjusted for price, however, this is a minus of four percent compared to the same period last year.

“Sales only grow through rising prices due to inflation,” explained HDE CEO Stefan Genth recently about this difference. The high inflation – which at 10.4 percent is currently the highest it has been in over 70 years – is putting a massive strain on purchasing power.

source site