German spending spree fuels economy
SALES of new kitchens are up more than 10 percent already this year at German kitchen maker Haecker. For those who would rather someone else did the cooking, roasted monkfish and turbot with truffles are flopping on to plates at Berlin’s Michelin-starred restaurant Fischers Fritz.
A blizzard of corporate good news shows that famously frugal Germans are now snapping up soccer shirts from Adidas and electronics from retail chain Media-Saturn.
With interest rates on savings low, unemployment falling, oil prices sliding and pay rises outpacing inflation, economists say German consumers have finally woken up and are likely to keep on spending through 2015.
Markus Sander, the marketing head at Haecker, a family firm with more than 1 200 employees, said Germans were now splurging on high-end kitchens – many costing more than a new car – because low interest rates made saving unattractive and loans cheap.
“Five years ago the frontpage headlines were all about unemployment. But now you read about job growth everywhere so people are feeling less worried and they’re spending more on durables like furniture and kitchens,” he said.
At Fischers Fritz, where main courses set diners back up to
90 (R1 174), turnover soared by 10 percent last year. Head chef Christian Lohse said people hosting events were now ordering delicacies like trout caviar, not staples like sausage.
“Germans think in terms of security and seem to feel secure at the moment. That’s really noticeable in the way they’re spending – the restaurant industry is booming,” he said. “People say: ‘Let’s just have a bigger, better party because if I can only get 0.0 or 0.1 percent interest on my money it’s not worth investing it, so I might as well just spend it.”
Frugality is still a prized national trait, and Germans still saved 9.2 percent of their disposable income on average last year. But while that figure is high by global standards, it was Germany’s second lowest since 2000.
There are many signs that spending could increase further still this year, welcome news to struggling countries across the euro zone who have long complained that Germans hold back the rest of the bloc’s growth by buying less than they make.
German unemployment is now at 6.5 percent, its lowest rate since reunification in 1990. German workers have secured the highest negotiated wage increases in two decades.
A dramatic drop in energy prices is putting more cash in pockets too.
Household spending’s contribution to growth in Europe’s largest economy rose at its strongest rate in three years in 2014 and it made up more than half of Germany’s national output last year. Along with resurgent investment it has eclipsed Germany’s legendary exports as the main driver of growth.
“The mood among consumers is excellent at the moment – it’s almost euphoric,” Rolf Buerkl, an analyst at market research group GfK, said. His firm says Germans are more willing to buy now than at any time since a one-off blip in late 2006 ahead of a sales tax hike.
The government expects the economy to expand by 1.5 percent this year, but others say that is an understatement. Insurer Allianz has raised its forecast to 2.1 percent from 1.6 percent, which would see Germany motoring ahead of the wider euro zone.
Bundesbank president Jens Weidmann has described the fall in global energy prices as a small economic stimulus package freeing up cash for consumers to spend on other items.
Last month IG Metall, Germany’s biggest trade union, secured an inflation-busting 3.4 percent wage increase that would likely benefit 3.7 million workers. – Reuters
The economy is expected to expand 1.5 percent this year, but others say that is an understatement.