German consumers are keeping their money together

pedestrian zone

The Germans’ willingness to buy, otherwise at a rather high level, has decreased.

(Photo: imago images/Ralph Peters)

Dusseldorf Omikron hits the German consumers on the mind. The HDE consumption barometer for February continued to cloud over and is now at 94.62 points, the lowest level since March 2021. Since its interim high last summer, the leading indicator has been on an almost constant downward slide.

In February, consumers’ propensity to buy collapsed and slipped to a record low. Economic expectations also declined sharply. The consumption barometer is based on a representative monthly consumer survey. The various sub-indices are weighted according to their influence on consumption. The barometer is calculated monthly by the Handelsblatt Research Institute for the HDE trade association.

On the other hand, the personal income expectations of the consumers surveyed increased. A major reason for this is likely to be the good development on the labor market. According to the Federal Employment Agency, the labor market has now largely left the pandemic behind. Seasonally adjusted, unemployment in January fell almost back to the pre-crisis level of March 2020.

The economy will remain in recession until spring

Many workers who were once employed in industries hit particularly hard by the pandemic have now taken jobs in other parts of the economy. As early as spring, the hospitality and event industries in particular are likely to be short of numerous employees, which is likely to drive up wage levels. A further complication for these sectors is that this year the minimum wage will rise three times to €12 an hour.

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But until the beginning of spring, the German economy is apparently stuck in a new recession. After economic output shrank by a surprising 0.7 percent in the final quarter, economists are expecting a further decline in gross domestic product for the current first quarter. For the year as a whole, growth of between three and four percent is expected. However, the prerequisite for this is that the pandemic subsides soon, the supply bottlenecks gradually resolve and the high inflation is contained so that the loss of purchasing power for consumers can be limited.

For January, the Federal Statistical Office put inflation at 4.7 percent. Most economists are assuming that inflation will fall over the rest of the year, but will remain above the ECB target of two percent for the foreseeable future. On Thursday, the central bank indicated that it had been surprised by the sharp rise in prices. Therefore, a tightening of monetary policy in the second half of the year can no longer be ruled out.

In view of the many uncertainties, the HDE trade association expects a nominal increase in sales of three percent for 2022, which would roughly correspond to the growth in the previous year. Due to the noticeable increase in prices, however, a small real plus is likely to remain at most.

Delivery problems have obviously eased

According to an HDE survey, 46 percent of retailers who have to work under 2G rules (only vaccinated or recovered customers have access) describe their business situation as bad – without 2G this value is only 24 percent. In addition, many dealers continue to have problems with delivery difficulties. In particular, the areas of sporting goods, electronics and household goods continue to be “massively affected”, according to the trade association.

Nevertheless, according to the Ifo Institute, the delivery problems in retail have recently “relented noticeably”. Only 57.1 percent of retailers reported in January that not all goods ordered could be delivered. In December it was 81.6 percent. The situation remains particularly problematic for DIY stores, where almost 94 percent of companies are still reporting delivery bottlenecks. The same applies to car dealers, 84 percent of whom cannot fulfill their customers’ wishes.

The business climate for the entire trade improved slightly in January, although pessimism still prevails. The business situation is assessed as good by the majority, but the business prospects are negative according to the surveyed wholesalers and retailers, albeit not quite as clearly as in the previous month.

All in all, the signals for the coming months point to an upswing – the only question is when exactly it will start and how strong it will be.

More: Trade, cars, pharmaceuticals: This is how companies arm themselves against delivery problems and other economic brakes.

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