Retailers in Europe are predicting their best Christmas since the 2008 financial crisis, though optimism is laced with caution in the face of rising e-commerce competition and early discounting in a fragile economic recovery.
Record unemployment and shrinking disposable incomes over the past few years have kept the brake on consumer spending, which generates about two thirds of gross domestic product. But retailers are drawing confidence from signs of improving shopper sentiment as they negotiate the key Christmas period.
The average family budget for Christmas gifts across Europe should rise this year for the first time since 2008, gaining 0.7 percent to about e450 (R6 400), though it remains below pre-crisis levels, a survey by consultancy Deloitte showed.
The biggest gain is expected in Germany, with average spending up 6.7 percent in Europe’s biggest economy. Spanish families, despite unemployment still at 26 percent, are forecast to lift festive spending by 1 percent on last year, after a 4 percent decline in 2012, but still-gloomy Greece, Italy and Portugal are expected to post declines again.
German retail industry association HDE forecast a 1.2 percent increase in total Christmas sales, noting a recovery in the second week of this month after a fierce storm in the first.
“Customers flocked into city centres and shopping malls looking for gifts. That makes us hopeful for a strong final push,” HDE managing director Stefen Genth said.
The HDE expects the increase to be driven by a 15 percent rise in online purchases, echoing Deloitte’s prediction for a 19 percent lift in Britain’s online Christmas spending.
Market research specialist Verdict forecast fourth-quarter UK retail spending to rise 2.2 percent year on year to £88.4 billion (R1.49 trillion) – the best since 2007, when spending rose 3.1 percent to £82.4bn.
Optimism in Spain, where consumer confidence last month reached its highest level since late 2011, has prompted retailers to hire 5 percent more staff than last Christmas. That appears to have been justified by crowds that prompted occasional closures at Madrid’s central station on the first weekend of December.
Spain’s Inditex, the world’s top fashion retailer, had seen “positive sales growth” in its home market, where it makes a fifth of turnover, chairman Pablo Isla said last week.
Inditex rival Hennes & Mauritz has also reported accelerating sales, while grocers Carrefour of France and Metro of Germany have both made upbeat Christmas predictions.
Yet the fragility of the recovery has raised the stakes for the many retailers still suffering from a squeeze on disposable incomes from government spending cuts and intensifying competition from online players such as Amazon.
Economic growth in the euro zone slowed to only 0.1 percent in the third quarter, while consumer sentiment worsened unexpectedly last month, ending improvements in confidence that began late last year. – Emma Thomasson and Dominique Vidalon in Berlin and Paris for Reuters