The second wave of the Covid-19 pandemic is beginning to stifle the previously expected recovery of the European economy, particularly for the consumption of non-essential products and services. Fortunately, it has not yet led to the retail lockdowns of the first wave in the spring – except in Wales and the Republic of Ireland, where government authorities have imposed them on retailers of non-essential products, along with pubs and restaurants.
The lockdowns will take place in Ireland for four weeks from Oct. 21. They will start in Wales on Oct. 23 and then go on until Nov. 9. There is no guarantee that this will not happen elsewhere if the current restrictions are deemed insufficient, with possible effects on the important Christmas selling season.
The British Retail Consortium has just launched an advertising campaign across the U.K. to encourage people to start their Christmas shopping earlier this year just in case, although many observers feel that much of the shopping will be carried out online anyhow – for convenience’s sake or to avoid contamination.
In the three months through September, total retail sales of non-food products were up by 3.2 percent in the U.K. on a comparable basis from the year-ago period, and their sales over the internet were up by 36.7 percent in September alone.
These figures indicate that some early Christmas shopping has already taken place. However, GfK’s latest consumer confidence report indicates that, of the five biggest European countries, the U.K. is currently showing the lowest “willingness to buy” among consumers. Combined with recent new increases in the number of infections, uncertainty over the outcome of the current negotiations with the European Union on Brexit seems to have contributed to the malaise.
The European consumer survey, conducted by GfK on behalf of the European Commission on Sept. 1-20, when the situation was less serious than now, put the indicator for the U.K. at 36 points below the year-earlier level, despite a slight improvement of 1.5 points in September from the previous month.
This is in spite of an unemployment rate of only 3.9 percent this past June in the U.K. According to Eurostat, unemployment rates for August stood at 16.2 percent in Spain, 9.7 percent in Italy, 7.5 percent in France and 4.4 percent in Germany.
According to GfK, consumers were more inclined to buy in Germany than in the other countries in September. The country’s index was 17 points below its level in September 2019. Germans’ propensity to make purchases recovered significantly after reaching bottom in April, but the September indicator, at 38.4, was five points below the August level, showing a worrisome reversal. German consumers, who tend to save money when the economy is not flourishing, responded well to a reduction in the value-added tax in July, but the effect is diminishing.
In contrast, consumer confidence has reached nearly pre-crisis levels in Italy, where the pandemic struck earlier and the number of new infections has been lower than anywhere else lately. GfK’s indicator for Italy stood at 3.1 points in September, almost five points better than in August and only three points below the level of one year earlier.
Moreover, in Spain and France, where the coronavirus situation is worse, the willingness to buy improved during the summer months. In Spain, the consumer confidence index rose sequentially by six points in September, but with a minus of 24.8 points, it was 17 points lower than in the same month of 2019.
In France, the index gained just 1.2 points in September, ending up with a minus of 13.2 points. That was a full 20 point less than in the year-earlier period.
A separate study conducted by GfK on 42 European countries indicates that European consumers will have 7 percent less money at their disposal in 2020 for normal household consumption due to the coronavirus pandemic. Lichtenstein and Switzerland come at the top, and Turkey at the bottom/