Ikea’s Billy bookshelves will remain cheapest to buy in the euro zone next year as the region’s debt crisis weakens its currency and hurts consumer spending.
Bloomberg’s annual global index tracking the dollar cost of the signature bookcase sold by the world’s biggest home-furnishings retailer showed an average price drop of 5 percent to $59.35 across 41 countries listed for 2013. Billy was cheapest in the Netherlands at $38.62, and other euro-region members shifted down the table from last year as the euro weakened and the company kept a lid on price increases there.
“Many European countries are in a severe recession at the moment,” said Jens Kramer, an economist at NordLB in Hanover. “For the euro zone as a whole, our outlook is that consumer demand is very weak and it will stay that way during the next year or so. There is not much room to raise retail prices for goods that are in the focus of consumer demand.”
Euro-area unemployment reached a record 11.4 percent in August and consumer confidence dropped to the lowest since May 2009 last month. Those statistics underscore the agony of households enduring the fallout from the debt crisis as budget cuts force at least at five euro nations into recessions.
European stocks were little changed today as investors awaited the outcome of a two-day summit of European Union leaders in Brussels to discuss joint banking supervision and options for closer economic and fiscal union in the 27-nation bloc. In the U.S., Standard & Poor’s 500 Index (SPX) futures were also little changed before reports on jobless claims and leading economic indicators, and after Chinese growth data showed signs of a pickup.
The Billy product assessed for Bloomberg’s index is a white bookcase that’s 202 centimeters (79.5 inches) high, 80 centimeters wide and 28 centimeters deep. Data was collected on the website of the company, which was created by Swedish-born billionaire Ingvar Kamprad. Prices were taken on Oct. 12 and converted to U.S. dollars at the average exchange rate over the previous 30 days.
While the price fell from last year’s $62.49 average, the cost of Billy did jump in some major economies. Ikea reversed a discount offered in the U.S., imposing a 20 percent increase to $59.99. The U.K. version became 9.4 percent more expensive at 35 pounds ($56.35).
In dollar terms, the price of Billy shelves fell in 10 euro members out of the 13 listed as the European single currency weakened 4.6 percent in the past year. In local currency, it rose in six, was unchanged in six and fell in Slovakia. The only euro countries where Ikea raised prices by more than 1 euro ($1.31) were Spain, France and Belgium, where the company aligned the cost toward those of neighboring markets.
Retail sales in the 17-member euro area dropped 1.3 percent in August from a year earlier, the European Union’s statistics office in Luxembourg said on Oct. 3. Sales of electrical goods and furniture in the region dropped 2.1 percent from a year earlier in July, the month with the most recent data.
The euro-area economy shrank in the second quarter, and the economy will continue to contract in the third and fourth quarters and stagnate in the first three months of next year, the Ifo, Insee and Istat institutes forecast on Oct. 5.
“It’s very much a case that consumer demand is weak, particularly in furniture,” said Richard Perks, a retail analyst at Mintel International in London. “There’s been a great reluctance to spend on furniture, on housing, or make any big investment. It’s classic recessionary impact.”
The euro dropped against 13 of the single currency’s 16 most-traded peers in the year through Oct. 17.
“The euro will be a little weaker against the U.S. dollar than it is at the moment at the beginning of next year and it will stay at this level” in 2013, NordLB’s Kramer said. On a trade-weighted basis, “the euro should also tend to a certain weakness against the other currencies too.”
The highest dollar prices for Billy shelves were in the Dominican Republic, with a price of $110.76, followed by regions in eastern Australia.
Data released in the U.K. today showed retail sales rose more than economists forecast in September on increased demand for winter clothing and school uniforms. Sales including fuel gained 0.6 percent from August, when they fell 0.1 percent. The median forecast of 24 economists in a Bloomberg News survey was for a 0.4 percent gain.
A separate release from China’s National Bureau of Statistics showed that gross domestic product rose 7.4 percent in the third quarter from a year earlier. That matched the median estimate in a Bloomberg News survey and compared with 7.6 percent growth in the second quarter. GDP climbed 2.2 percent from the prior period, a four-quarter high.
In the U.S., initial jobless claims in the world’s biggest economy rose to 365,000 in the week ended Oct. 13, economists projected before a Labor Department release at 8:30 a.m. in Washington. The index of U.S. leading economic indicators rose 0.2 percent in September, economists projected before a Conference Board report at 10 a.m. in Washington.
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