A high propensity to save has pushed consumer sentiment in Germany to its lowest level since April. A recovery in consumption seems far away. Online retail is now also noticing this.
Germans are saving more again – and are further clouding the consumer climate. The GfK consumer researchers predict a decline in their barometer by 0.9 points to minus 26.5 points for October. This was the second time in a row that it fell to its lowest level since April. “The chances of a recovery in consumer sentiment this year have probably fallen to zero,” said GfK consumer expert Rolf Bürkl.
The market research company announced today that the propensity to make purchases is increasing minimally and expectations regarding income have also stabilized. “However, a significant increase in the propensity to save will cause the consumer climate to fall again.” Economists surveyed by Reuters had only expected a decline to minus 26.0 points.
Inflation continues to increase the propensity to save
According to GfK, people are currently a little less pessimistic about the economy and their own finances. The willingness to make larger purchases also increased slightly. However, the so-called propensity to save has reached its highest level since April 2011. The reason is “a persistently high inflation rate due to sharply rising food and energy prices,” explained Bürkl. “Private consumption will therefore not make a positive contribution to overall economic development this year.”
In order to significantly improve domestic demand, it is absolutely necessary that the inflation rate is brought back to a tolerable level, emphasized the GfK. The inflation rate in Germany is currently 6.1 percent, but according to economists it is expected to fall to 4.6 percent in September.
The desire to make purchases, although it has increased slightly, has remained at a very low level for a year now, it said. According to consumer researchers, there is hardly any room in private household budgets for larger purchases. There are also concerns about job losses and bankruptcies. Labor market experts assume that the number of unemployed this year will be on average 150,000 to 190,000 higher than last year.
After a long time, online retailers are once again suffering a decline in sales
Online retail is also increasingly feeling the effects of the slump in consumption in this country. According to the study published today by the Cologne retail research institute EHI, the 1,000 online shops with the highest sales suffered a decline in sales last year for the first time since the study began in 2008. This year, the experts expect “the downward trend to continue,” as the head of the e-commerce research department, Lars Hofacker, reported. The only question is how big the minus will be.
The fact is: According to the industry association bevh, sales in e-commerce were already around 13.7 percent below the previous year’s level in the first six months of this year. For the entire year, the EHI experts expect, in the best case scenario – with a trend reversal in the second half of the year – a decline in sales of 4.2 percent in online retail. In the worst case scenario – with further sharp declines in sales in the rest of the year – nominal net sales could also collapse by a whopping 16.9 percent to 64.6 billion euros.
The EHI is not alone in its gloomy assessment of online giants such as Amazon, Otto or Zalando. The bevh also recently forecast a decline in sales of more than five percent for 2023. According to an industry survey by the association, only about one in five online retailers expect to put the crisis behind them over the course of the year. The German Retail Association (HDE) is somewhat more optimistic and expects a nominal increase in sales of 5.8 percent for online retail.