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Crisis – what crisis? Teaserbild

In 2009, the majority of the population in Germany did not experience any negative impact on their personal living circumstances as a result of the financial and economic crisis. The labour market was surprisingly robust, with an average of 3.4 million unemployed and an increase of just 155,000 over 2009. Around one million people for the year were protected from unemployment by short-time working. Private consumption was also supported by a historically low inflation rate of 0.4%. Falling prices,particularly for mineral oil products and food, boosted consumers’ purchasing power. Accordingly, the propensity to buy, as surveyed as part of the GfK consumer climate study, rose significantly from January to September 2009.

Compared to other countries, German consumers revealed themselves to be the optimists of Europe: while here in Germany the propensity to buy recorded an average value for the year 2009 of +21 indicator points, the same survey produced a value of -26 points in Italy, -40 in Great Britain and even -45 indicator points in France. The consumer climate in Germany was not dealt a blow until late autumn.

Line chart: GFK indiactor for consumer climate

Growing fear of unemployment as well as of rising energy prices made for a more subdued consumer climate in German private households towards the end of last year.

Modest consumption prospects for 2010

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With the start of 2010, consumers in Germany are expecting the economic recovery process to continue, though with reduced momentum. This assessment is in line with the forecasts of leading economic institutes. However, consumers and experts alike are anticipating that the labour market will deteriorate this year. Price development for the year as a whole is also being viewed less optimistically, although discount sales promotions in retail prompted an increase in the propensity to buy at the start of the year. Government economic stimulus packages, such as the increase in child benefits or child allowance as well as the improved tax deductibility of health insurance contributions,Image hoover are set to ease the financial strain on consumers in 2010. However, at the same time, there is the threat of slightly higher inflation and various additional burdens as a result of additional health insurance contributions and rising communal taxes. GfK is expecting consumption among private households to stagnate in 2010, but not decline. It is likely that reductions in consumption will come into play in the second half of the year.

Fear of unemployment weighs heavily on consumption

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Unemployment and real fears of being made redundant are changing the behaviour of German consumers quite dramatically. In respect of day-to-day goods, affected households are reducing their consumption by around 10%. But the threat of unemployment does not just mean that consumers are spending less, they are also putting more money aside for a rainy day. This “precautionary saving” is also having a negative impact on consumption.

In 2009, around 23% of German households were either directly affected by unemployment or had a real fear of being made redundant. For 2010, GfK is expecting a rise in the number of these households affected by the crisis to around 27%. GfK also estimates that a similar number of households are at risk of being affected by the crisis in 2010.

Bar chart: Unemployment affects consumer behaviour both directly and indirectly

These households are trying to keep to their shopping preferences, but are taking advantage of special offers more. Nevertheless, around 46%of German households can be classified as crisis-resistant, which is one percent down on the previous year. Consumption among these households is not suffering as a result of the crisis and is actually being boosted by keenly priced offers. At the same time, expectations regarding product quality and manufacturer are rising in this consumer group. Sustainability, fair trade and corporate social responsibility are influencing purchase decisions in crisis-resistant households to an ever greater extent.

Winners and losers of the crisis

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The reductions in private consumption were felt most acutely last year by the catering industry. Out-of-home consumption fell by around 8% in value terms, according to GfK’s estimates. The crisis prompted consumers to focus their activities more on their own homes. The beneficiary in this was the food retail sector. Although this sector posted a drop in sales of around 1%, this was mainly the result of its own price cuts. The increased focus on the home, known as “homing”, was particularly evident in DIY stores. Their sales rose by 2% last year. The consumer electronics sector also profited and generated sales that were level with the previous year.

Homing benefited some product groups in particular. For example, compared with 2008, around 7% more households improved their home surroundings with an open fireplace or tile stove. Turnover from plants was up 7%, and that from garden furniture and ornaments rose by 4%. The small electrical appliances segment also profited, with sales climbing around 5%. This rise was driven particularly by capsule espresso systems, which posted a sales increase of just under 14%, fully automatic coffee machines (up 9%) and cylinder vacuum cleaners (up 6%). Alcoholic drinks also recorded positive growth. Sales of sparkling wine rose by around 2%. And last year spirits were up 1% in sales volume and even around 3% in value terms. Retailers benefited here from the declining out-of-home sector.

The trend towards homing will also have an effect on consumption in 2010. GfK is expecting a further fall in out-of-home consumption, and is anticipating that the food retail sector will post sales at roughly the same level as for the previous year. Consumer electronics will receive an additional boost from the football World Cup. DIY stores can expect to continue their positive growth.

Crisis changes the value orientation of consumers

Bar chart: Assessment of shifts in importance

Besides having a monetary impact, the financial and economic crisis has also changed the value orientation of consumers, particularly in the area of financial services, where blind trust has been shown to be the wrong attitude. As a consequence, consumers have become more cautious and are more reluctant to make a leap of faith. They are also questioning their thoughts and actions more. One of the most important discoveries that consumers have made can be summed up with the German saying “Greed devours the brain”.Image hammer Greater awareness in consumption, quality instead of quantity, elimination of the superfluous and enjoyment of small pleasures are the new trends among consumers. This change in value orientation is opening up new possibilities. Socially responsible companies, traditional brands and domestic products have a particularly good chance of qualitative growth in 2010.

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