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Germans Bail Out Christmas With Biggest Splurge in Six Years

Germans Bail Out Christmas With Biggest Splurge in Six Years
A customer looks at flat screen televisions at a Saturn store in Munich. Photographer: Guido Krzikowski/Bloomberg

Just as Germany’s government bails out its European partners, so the country’s consumers are leading the Christmas cheer.

Germans will spend 76.9 billion euros ($105 billion) in November and December, 2.5 percent more than last year and the strongest growth since 2004, according to the HDE retail association. Deloitte LLP also said retail spending will rise “slightly,” even as most of western Europe contracts.

“Germany is an island of bliss within a pessimistic Europe,” Peter Thormann, head of Deloitte’s consumer business in Germany, said in an interview. “I haven’t seen this for the last 10 years at least.”

The country’s jobless rate fell to an 18-year low in October, boosting consumer confidence at the start of a quarter when some retailers generate all their annual profit. After a decade where consumer spending barely grew, sales may gain as companies including Porsche SE reward workers with bonuses.

“I see a clear improvement compared to last year’s business -- customers aren’t asking so much about prices and just buy what they like,” said Yoensis Mahlau, who runs the MCM leather-goods store on Dusseldorf’s Koenigsallee. Men are spending more on their wives, snapping up cognac-colored retro-style bags for about 500 euros each, she added.

Christmas Markets

Germans, whose 2,500 outdoor Christmas markets attract tourists from around the world, traditionally spend less than the rest of Europe on Christmas presents and festive meals such as goose with dumplings. Average spending per consumer will be 470 euros this year, compared with about 1,200 euros in Luxemburg, 1,000 euros in Ireland and 640 euros in Italy, according to a Deloitte survey.

In western Europe, where euro-area unemployment is at a 12-year high, only Switzerland and Luxemburg are likely to show stronger growth in Christmas sales, according to Deloitte. A survey by the accounting firm showed shoppers in 19 western European countries expect to spend 2.5 percent less.

Douglas Holding AG, Europe’s biggest perfumery chain and the owner of the Thalia book stores, is among German retailers that are optimistic for the festive season.

“Consumer sentiment is positive,” Douglas Chief Executive Officer Henning Kreke said by e-mail. Classic perfumes including Chanel No. 5 and new fragrances such as Charm Rose by Thomas Sabo are proving the most popular with customers, Douglas said.

Metro AG’s Media Markt and Saturn chains also expect “a good Christmas,” Roland Weise, CEO of the retailer’s consumer electronics unit, said by e-mail. Popular selections may include games consoles, televisions and espresso machines, he said.

Toy Growth

Sabine Niewalda, a city administrator, predicts her spending will be “slightly higher as my nephew will get a big monetary donation for a notebook he wants to have.” She will spend “several hundred” euros in total as she shells out more on books and games.

Germany’s toy retail association forecasts a 3 percent rise in sales to a record 2.46 billion euros in 2010, with 40 percent of revenue coming in the last two months of the year.

Parents will “dig deep into their purses,” for toys, said association director Willy Fischel.

Last year, seasonal spending in Germany dropped 1.6 percent as the economy was buffeted by the worst crisis since World War II. Retail sales in Europe’s biggest economy were little changed at about 400 billion euros over the past decade.

This year, the economy will grow more than 3 percent, according to the Bundesbank. Gross domestic product has grown for six consecutive quarters since the nation emerged from recession in the second quarter of 2009.

Christmas Bonuses

Siemens AG said this month it would spend 310 million euros on a special bonus for employees and bring forward a 2.7 percent pay increase for workers in Germany. Chemicals maker Lanxess AG in August reinstated a year-end bonus, while Porsche is rewarding workers with a 2,100-euro payout.

“We will spend a bit more than last year as we have got a child and have more confidence about work,” said 39-year old gardener Oliver Grunewald. He will spend about 300 euros mostly for toys and clothes and is buying gifts early this year to avoid the consumer stampede on advent weekends, he added.

Christmas sales account for about a fifth of all retail revenue, according to the HDE. Retailers of books, jewelry, toys and consumer electronics generate 25 percent to 30 percent of revenue in the period, the association said.

Still, not everything has changed in a year. About 78 percent of Germans will buy discount or private brand food for their Christmas cooking, according to Deloitte.

“Germans are doing well compared to other Europeans, but still they are cautious,” said Deloitte’s Thormann.

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