Lacklustre Demand Expected from Eurozone Consumers in 2012

Eurozone consumers remain reluctant to spend as unemployment continues to rise and austerity depletes their incomes. However, the Northern countries have fared generally better than the South, and good opportunities still exist for businesses that can adapt to this difficult environment.

Real GDP Growth and Real Growth Index in Consumer Expenditure per Capita in theEurozone: 2006-2012

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Source: Euromonitor International from national statistics/Eurostat/OECD/UN/International Monetary Fund (IMF), World Economic Outlook (WEO)

Note: Data for 2012 are forecasts

  • The severe austerity measures, implemented in 2011 by many eurozone countries, have finally started to bite, dampening consumer demand and slowing down economic recovery. As a result, the eurozone economy lost its momentum and contracted in the fourth quarter of 2011 by 0.3% quarter-on-quarter, according to Eurostat’s seasonally adjusted figures;
  • Unemployment reached 10.8% of the economically active population in February 2012, from 10.0% in February 2011 according to Eurostat. Click to tweet! Rising unemployment together with incomes tightened by government cuts and reduced credit availability have made consumers cut back on spending. Real per capita consumer expenditure in the eurozone fell by 0.2% between 2010 and 2011 and is expected to drop by a further 0.4% between 2011 and 2012;
  • Yet consumer confidence rebounded a little in the first quarter of 2012, according to Eurostat, with consumers welcoming the easing of the Greek debt crisis and hoping that reforms will eventually bring back growth. Retail sales also picked up slightly in January, which shows thatconsumers can still be wooed by reductions and clearances.


The consumer landscapes vary for the different eurozone members:

  • As a leading exporter of business services, Finland will experience the strongest real growth in consumer expenditure per capita between 2011 and 2012, at 2.6%. Click to tweet! The eurozone powerhouses – Germany and France – will also see some growth, at 1.0% and 0.2% annually in real terms respectively. Estonia, Malta, Slovakia, Austria and Belgium will all see slight rises in spending as well;
  • Consumers will cut back most drastically in countries experiencing the harshest austerity measures – Portugal, Ireland, Italy, Greece and Spain (the PIIGS) – as well as in countries where economic growth relies heavily on exports to the eurozone – the Netherlands and Slovenia. In addition to cutting down on luxuries, consumers in these countries will also reduce their non-discretionary purchases, with strong reductions in spending on food and non-alcoholic beveragesexpected in 2012;
  • Although all consumers in the eurozone (apart from Finland) will see falling real per capita spending on food and non-alcoholic beverages in 2012, their ways of cutting down on food bills have differed. Consumers in Estonia, Malta, Belgium and Germany have tried to avoid wastage and shop for bargains in the local convenience stores. Estonia will see a real 8.5% increase in the retail value of that sector between 2011 and 2012, bringing the share of convenience stores in grocery retailing to 25.6% in 2012, from 17.4% in 2006. Discounters have been particularly favoured in the cash-stripped Slovenia, Ireland and Greece. In Slovenia, they will have increased their share of the grocery market from only 3.5% to 9.7% between 2006 and 2012. The Irishconsumers have been buying on bulk and hunting for bargains, with the retail value of hypermarkets increasing by more than seventh-fold over the same period;
  • Cuts in the food bills will allow some increases in discretionary spending. Spending on communications will rise in 2012 in all eurozone countries apart from Portugal and Spain. In Ireland, Italy and the Netherlands this will be the only area of growth. Good opportunities will also exist in health and education, especially in Finland, Germany and Slovakia, as consumers turn to private providers after their governments reduce services in those areas.

Real Growth Index in per Capita Consumer Expenditure in Selected Areas in theEurozone: 2006-2012

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Source: Euromonitor International from national statistics/Eurostat/UN/OECD

Note: Data for 2012 are forecasts


Lacklustre consumer demand will contribute to weak economic growth: Click to tweet!

  • The eurozone economy is expected to contract by 0.6% year-on-year in real terms in 2012, with the sharpest real GDP drops experienced by the PIIGS, the Netherlands and Slovenia. However, France and Germany are not expected to enter a recession and will continue to push forward theeurozone as a whole. This will ensure that economic growth returns in 2013, at 0.8% year-on-year in real terms;
  • The unemployment rate in the eurozone is expected to rise to 10.9% in 2012, from 10.2% in 2011, before falling down slightly to 10.5% in 2013. High levels of unemployment continue to weigh on disposable income;
  • Per capita consumer expenditure is forecast to fall by 0.4% in real terms in 2012 over a year earlier, before returning slowly to growth, at 0.2% in real terms in 2013. This growth forecast is nevertheless dependent on the risks associated with the sovereign debts of Greece, Italy and Spain.