Apr 21, 2016
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Survey finds Europeans fear economic slowdown

Apr 21, 2016

During the first quarter of 2016, the Syrian war as an ongoing cause of the refugee crisis, the terrorist threat in Europe, Great Britain's possible exit from the EU and the continued recession in major developing countries weakened the consumer climate and, in particular, the economic and income expectations of European consumers, says a study by GfK Consumer Climate Europe. Between December 2015 and March 2016, the consumer climate for the EU fell by 3.2 points to 9 points.

Economic expectations remained static in Germany in the first quarter of 2016, in spite of the country's good economic situation. The indicator stood at 0.5 points in March, just slightly above its long-term average of 0 points. This represents a modest drop of 1.4 points in comparison with December of last year. However, the extent by which the indicator has fallen in the last few months can be seen by comparing it with the level reached in March 2015, when economic expectations reached 36.8 points.

In contrast, income expectations remain at a very high level. In March, the indicator stood at 50.5 points, representing a loss of just 0.3 points in comparison with December. What's more, at 53.1 points, it was only very slightly higher this time last year. The Germans therefore still believe that wages and salaries will continue to increase significantly this year. The extent to which these hopes are justified will be demonstrated by the upcoming collective bargaining processes for groups of workers such as public employees.

Standing at exactly 50 points, propensity to buy was also still very high in March. The Germans seem to believe that now is currently the right time to spend money on expensive products and services.

While the indicator was only 1 point lower in December of last year, it has fallen by 13 points in comparison with March 2015.

In Great Britain especially, the referendum due to take place in June on the country's possible exit from the European Union is casting a shadow of doubt on the future. Numerous economic experts as well as many British consumers are predicting strong negative economic consequences should a so-called Brexit come to pass.

The economic expectations of the British fell further during the first quarter of the year. The indicator stood at 2.1 points in March, just slightly above its long-term average of 0 points. This represents a loss of 14.5 points since December, and a staggering drop of 25.8 points in comparison with March 2015. This trend is in stark contrast with the country's actual level of economic growth, which last year increased by between 1.8 and 3.0 per cent in comparison with the respective previous quarter. One reason for the rather pessimistic underlying mood among consumers could be the referendum due to take place in June about whether Great Britain should leave or remain in the EU. Many consumers feel irritated, and seem to fear there could be negative repercussions for the domestic economy should the referendum lead to a so-called Brexit.

At the other end of the spectrum, British consumers are expecting a moderate increase in wages and salaries over the next few months. In March, income expectations lay at 17.7 points. Although this figure is more than 5 points lower than in December, it is similar to the level seen in March of last year (15.8 points).

As was also the case in the last quarter, only a few British consumers currently wish to make expensive purchases. This is illustrated by the fact that the propensity to buy indicator lay at 11.1 points in March. This represents an increase of 0.5 points in comparison with December as well as a rise of 2.3 points compared with this time last year.

In November of last year, the Italians' economic expectations rose to 1.9 points, which marked the first time the indicator had been in the positive range since March 2010. However, the positive trends which brought about this growth are now a distant memory, as the indicator had dropped back to -21.4 points by March. This represents a loss of 20 points since December. It therefore seems as if Italian consumers do not believe that last year's positive economic figures will continue this year.

Income expectations fell to -3 points in March, despite having reached 8.4 points in January, the highest value since May 2002 (8.5 points). The indicator is, however, 0.8 points higher than it was in March 2015. The main reason for this very low level is undoubtedly the continued high level of unemployment. Although this decreased by 0.7 percentage points last year, in February it still lay at 11.7 per cent.

In contrast, propensity to buy continued to increase. The indicator stood at 26.4 points in March, which is 2 points higher than in December. In January, it climbed to 27.8 points, which is the highest value since June 1992 when 30.1 points were recorded. It seems as if Italian consumers believe now is a favorable time to make bigger purchases or spend larger sums of money. However, due to the continued difficult economic situation in which many consumers currently find themselves, it waits to be seen whether they can afford to make such purchases and will actually spend money on expensive products and services.

The GfK Consumer Climate Europe study surveys around 40,000 people a month in the 28 countries of the EU.

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