GfK: The outlook of customer behavioural trends in 2011

At a press conference held in Nuremberg, GfK presented a review of private consumption in 2010 and an outlook for 2011. As forecast by GfK, private consumption rose last year by 0.5%. For 2011, the market researchers are expecting private household expenditure to increase by a significant 1.5% and therefore make a strong contribution to the economic upturn. In a European comparison, Germans are by far the biggest optimists when it comes to consumption.

Romanians and Greeks hardest hit by the crisis

Consumers in Romania and Greece felt the effects of the financial crisis and the high level of debt of their respective countries very strongly last year. The gross domestic product fell in Greece by 4.2% and in Romania by 1.9%, and consumers’ economic expectations were correspondingly negative: the Romanians were bottom of the rankings in Europe, followed by the Greeks. The governments of both countries are under a great amount of international pressure to reduce their budget deficits, because they have received financial aid from the International Monetary Fund, the European Central Bank and the EU. Deep cuts in social services and increases in duties and taxes are the result. In line with this, the income expectations of consumers in both countries were negative in 2010. The propensity to buy was also affected by consumers’ fears for the future. Romania and Greece together with Portugal came in last in a Europe-wide comparison in 2010.

“Although they wrote and spoke about the fact that Romania will be not influenced by the crisis, we are, together with Greece, the most hit. 2011 seems to be a very difficult year also, with low income for the population and a level of pessimism above the European average”, stated Andi Dumitrescu, managing director GfK Romania.

Retail sector back in positive figures in Germany

Germany has shown impressive momentum in recovering from the financial and economic crisis.

According to GfK’s calculations, food retail outlets and chemist’s stores in Germany saw an increase in sales last year. With a rise of 1.2%, they achieved a sales volume of EUR 154 billion, which is a new record high. The non-food segment – areas such as electronic goods, textiles, furniture and DIY – also recorded a marked improvement in sales. A climb of an estimated 2.6% and total sales of almost EUR 148 billion were the best sales result for the non-food segment since 2002. Technical consumer goods, including among others consumer electronics, information technology (IT), telecommunications products, the photographic segment and household appliances, enjoyed particularly strong growth: sales increased by over 8% to EUR 47 billion.

Among consumers, a sustained trend towards quality and away from low prices as the sole focus can be observed. One example is the textile retail segment. Last year, the industry achieved a sales volume of around EUR 40 billion, with sales value growth of 2.4% and a slight decline in sales volume. On average, consumers spent more on each purchased item and tended to opt for higher quality products.

Promising consumption prospects for 2011

Germans’ consumption optimism has further increased at the beginning of 2011. The propensity to buy has climbed to a value of 41.8 points in January – the highest level since December 2006 – in spite of the recent rise in price expectations. The positive prospects on the labor market are further improving consumer sentiment.

For food retail outlets and chemist’s stores, GfK is forecasting a sales increase of approximately 1.7% for 2011, and experts are also anticipating a further sales surge in the non-food segment, with estimated growth of 1.7%, although the rise will not be as high as in the previous year.

French people fear a decline in their standard of living

In comparison with neighboring Germany, higher social security payments and shorter working hours as a result of the legally imposed 35-hour week are weighing on the economy’s competitiveness in France.

French consumers currently fear a major reduction in their standard of living. This is reflected in the average level of the income expectations indicator in 2010 and the propensity to buy of French people.

Government austerity measures have a negative impact on consumption in the UK

In the UK, the end of the long property boom and the government’s measures to consolidate the budget have had a significant impact. Last year, the propensity to buy reached a low value and the average indicator value for income expectations was also negative. The public sector is the largest employer in the UK, and the government’s austerity measures are therefore having a correspondingly large effect here. In addition, pay freezes and a high rate of inflation in comparison with Germany have reduced the living standards of British people.

Italians cut down their consumption

Italian consumers also took a pessimistic view of the economic prospects in their country last year. Economic growth was already very low before the financial crisis, the national debt was massive and last year unemployment reached its highest point since 2001. The country’s middle class is shrinking and Italian consumers are reacting by consuming with caution and displaying a high level of price sensitivity.

Real Estate crisis affects Spain

Spain is heavily affected by its real estate crisis. The unemployment rate has more than doubled from 2007 to 2010 due to the enormous weight of the real-estate sector for the country’s economy. The average indicator value for the economic expectations of Spanish consumers in 2010 was negative and personal income prospects were assessed even more bleakly. The government is combating the high national deficit by making cuts to some social services, reducing civil servant salaries and applying higher taxes: for example, the VAT rate has been increased from 16% to 18%.

Poland’s economic growth stands out

The gross domestic product in Poland grew by 3.5% in 2010 and was therefore almost as high as the German growth rate. However, the positive economic growth recorded last year was only noticed by Polish consumers to a limited extent. Anxiety fuelled by the media about the potential consequences of the financial crisis influenced Polish consumers more in their assessments than the visible economic growth. This is evident from the income expectations indicator, which stood at -1 points on average for the year. However, the propensity to buy reached a very positive value compared with the rest of Europe.

The survey

GfK-Euro Climate is implemented monthly in all 27 EU countries with a total sample of 39.900 interviews. The survey offers information about people price and income expectations, general economic expectations, but also willingness to buy and willingness to save.