Depressed economic climate not bypassing Euroland; more stabile economy forecast

It was midsummer when the headlines regarding the status of the consumer climate in Europe and the countries on the Euro currency began to hint at clouds on the horizon. Now, as the economic downtown spreads, Euroland has taken a hard hit with experts forecasting only a slight stabilization in 2009.

It was midsummer when the headlines regarding the status of the consumer climate in Europe and the countries on the Euro currency began to hint at clouds on the horizon.

Consumer mood hitting the skids. Spending drops. Inflation going up. Gas prices on the rise. Unemployment hits new highs.

Now, as the economic downtown spreads, Euroland has taken a hard hit with experts forecasting only a slight stabilization in 2009 – which of course means on the same lower level to which it’s sunk. Some economists forecast a slightly rosier picture and a bottoming-out in early 2009 although they add the economy won’t spring back immediately.

The GfK Group (, a market research group based in Germany specializing in retail, research, technology and media, released its prognosis Dec. 22, noting the consumer mood has benefited somewhat by a slowdown of the rate of inflation but is still threatened by the possibility of additional layoffs and or work stoppages in the manufacturing sector.

“The downswing of the expectations in the business cycle has slowed down a bit at the year’s end,” GfK researchers wrote. They said it had hit -2.3 points over November 2007. They also noted that the situation doesn’t yet warrant much optimism, at least in Germany.

For example, news outlets in Germany this month have reported the following:

>> Eurostat, a European Union agency that tracks statistics across the 15 Euro-zone countries, said that indeed the zone is now in a recession. Gross domestic product decreased in the 3rd quarter over the previous three months by 0.2 percent. That is on top of a drop in the GDP in the second quarter of the same 0.2 percent.

>> Experts expect a wave of bankruptcies in Germany in 2009. The prognosis came from a credit bureau which tracks such data. For 2008, the bureau already forecasts a 3-percent increase over 2007 with 30,100 companies declaring bankruptcy. For 2009, it expects that to go up by about 12 percent and to hit 33,800 companies.

>> Germans have in fact been holding back on their lottery spending, partly because of the country’s financial situation but also the economic climate’s affect on the jackpot. Up until December in comparison to the previous year spending on the lottery declined by about 12 percent. Jackpots haven’t gone over Euro 20 million (USD $28 million) whereas in 2007 the pot hit more than Euro 45 million (USD $62.6 million).

>> Despite lower gasoline costs and a slowdown in inflation, German consumers are holding back on their spending. Retail revenues in October, released in December by the government, climbed insignificantly over a year ago but when calculating in today’s dollars actually sank 1.5 percent. Non-grocery revenues did a smidge better, only sinking based on today’s dollars by 0.6 percent.

Across the broader Euroland, as the countries on the Euro are sometimes called, December wasn’t a good time with an economic indicator by the Deka Bank (, which pulls together a number of indicators to create one overview of economic status, showing a continued decline of -1.09 percent with a current stand of -1.73 percent. The indicator sank into the negative in mid-2008 and hasn’t had an increase in overall numbers since 2005. The last time, it was in the negative for any length of time was in 2001 before it returned to a positive indicator in mid-2002. Researchers take a look and compile figures that have to do with consumer trust, housing starts, stock market status, investment demands and other economic factors. Go to to find the group’s last eight years of indicators and to read more. Click here to find other economic reports in English.

Despite less-than-optimistic forecasts, Deka economists have stated in a Dec. 8 report the bottom may be near:

“The massive measures that have been taken worldwide by central banks and governments should slow and may even bring to an end the downward spiral triggered by the crisis on financial markets. This assessment leads us to forecast that, although the global economy is undoubtedly now in a recession, this will only bottom out in the first quarter of 2009. However, unlike the global economic crisis of the 1930s, rates of contraction will be limited and the global recession will come to an end in the second half of 2009.”

Other Euroland business trends are showing some whispers of potential stabilization, although not on all fronts. In the Frankfurter Allgemeine Zeitung (FAZ), a respected Germany newspaper, its monthly economic status report in December showed a drop in consumer prices matched with a slightly drop also in manufacturer prices. However, unemployment has continued to climb, now reaching about 12 percent across Euroland. Consumer confidence has dropped to nearly the same level as just after the changeover to the Euro as currency, or about -18 points after reaching a high in early 2007 of nearly +5 – the highest since 2001.

The FAZ concluded, however, that economists are basically poking around in the dark when it comes to their forecasts of how long the recession will last. The International Monetary Fund said that economic crises are stubborn.

Wrote the Deka Bank in a economic forecast earlier this month, “Only when the acute crisis of confidence on the capital markets has been overcome and the revisions of analysts’ earnings forecasts have been digested do we see any possibility of a sustained recovery.” 

--Therese Iknoian



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