Merkel predicts more jobs as consumer zeal signals recovery

German consumer and business confidence were at three-year high points on Tuesday and Chancellor Angela Merkel forecast that unemployment could fall below three million in Europe's biggest economy.

Merkel predicts more jobs as consumer zeal signals recovery
Photo: DPA

“We may get to three million or perhaps slightly below,” Merkel said after the economic research group GfK released its latest survey of consumer sentiment under the headline, “Consumer Climate at Three-Year High.”

On Friday, the Ifo research institute said business sentiment in Germany rose in September to levels last seen in mid-2007, suggesting that an expected slowdown will not mean a return to recession.

“Growth indeed seems to be stronger than we had expected,” Merkel told a congress of the German industrial federation (BDI) in Berlin.

The household sentiment index compiled by GfK and published for the month to come posted a solid gain to 4.9 points from 4.3 in September, a figure which was itself revised higher amid increased expectations for the economy, jobs and personal incomes.

A breakdown of Ifo’s data meanwhile revealed particular optimism among retailers who assessed the current situation to be the best since a boom that followed German reunification in 1990.

“Consumers currently expect the economic upturn to continue in the coming months,” a GfK statement added. “This is demonstrated by the sharp rise in economic expectations over the last three months,” it added.

They posted a sharp gain to 45.2 points, the highest level since March 2001.

“The decisive factor in the strong sentiment among consumers is the extremely positive development of the employment market,” GfK said.

In August, the jobless rate was stable at 7.6 percent of the workforce.

Barclays Capital economist Thorsten Polleit noted that a research unit at the Federal Labour Office forecast a drop in the number of unemployed “below three million in 2011 (which would mark the lowest level in nine years) even if the growth momentum slows in the second half of this year.”

Polleit pointed also to an Ifo survey of around 1,000 personnel directors that found 87 percent of German firms wanted to increase staff levels in the coming 12 months.

Against that background, a GfK sub-index of consumers’ propensity to buy moved away from a decrease and stagnation seen in previous months.

On Monday, the European Central Bank said growth in lending to the eurozone private sector picked up in August, with lending to households in the 16-nation area growing by 2.9 percent from the same month a year earlier.

Germany’s economy posted strong growth in the first half of 2010, and while the pace has eased since then, is still on track for a full-year expansion of around 3.0 percent, economists and the central bank have said.

The government is expected to raise its official growth forecast of 1.4 percent in October.

GfK said that if the economy continued to grow, unemployment fell further and inflation remained tame, consumption could see modest growth this year.

“German consumers still hold the key for self-sustained growth. It looks as if they finally might be willing to use it,” ING senior economist Carsten Brzeski commented.

The export-led economy is now also getting help from domestic consumption and business investment, underpinning hopes it will continue to act as the European locomotive.

GfK surveys around 2,000 consumers for its poll, which is conducted on behalf of the European Commission.


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‘Harryhandel’: Is the return of cross-border shopping in Norway really a good thing? 

The pandemic cut-off Norway from its neighbours, putting a temporary end to border shopping. Now ‘harryhandel’ trips are allowed again businesses in the country fear they will lose out as shoppers look abroad for cheaper groceries. 

Pictured is Norway and Sweden's border on the old Svinesund bridge.
Will the return of border shopping have a negative affect on the country? Pictured is Norway and Sweden's border on the old Svinesund bridge. Photo by Petter Bernsten/AFP.

In eastern Norway, particularly along the border with Sweden, cross-border shopping has long been common for residents looking for cheaper groceries and a better selection of products. 

Norway’s Covid-19 rules effectively put a stop to that until this summer. The closed border meant a record year for food and beverage sales in Norway. 

“Due to the fact that there was little action and that people did not travel, we noticed that our sales increased greatly during the entire period,” Øyvind Berg, production manager at Norwegian dairy firm Synnøve Finden, explained to public broadcaster NRK.

Now producers and supermarkets fear the impact of cross-border shopping being up and running again. 

“Our challenge is that we see that more than half of the food and beverage producers, i.e. the industrial companies, fear that they will lose market share because cross-border trade will return in full,” Petter Brubakk, director of food and beverage at the Confederation of Norwegian Enterprise (NHO), informed NRK. 

The majority of those who go shopping across borders in Norway will do so in Sweden. However, in the north, some will also venture into Finland or Russia.

Further south people will also travel to Germany or Denmark. 

Why do people go to other countries for shopping? 

Overall the main appeal of cross-border shopping is that its much better for consumers than shopping domestically. 

Norway’s EEA agreement with the EU means that most foods, drinks, tobacco products, alcohol and other agricultural products are more expensive than they are within the EU as custom duties are required to import them into Norwegian supermarkets. 

Not just that, but there is a much wider selection of products than in Norway due to laws that protect Norwegian products. For example, cheeses such as Cheddar are more readily available, cheaper and generally of better quality in other countries than those found in Norway. 

READ MORE: What is ‘harryhandel’, and why do Norwegians love it so much?

Is border shopping a bad thing for Norway?

Norwegian businesses argue that crossing the border to shop affects the whole value chain, negatively impacting everyone from Norwegian farms and producers to supermarket employees, not just companies profit margins. 

“My advice is to encourage Norwegians to buy Norwegian food, and help secure Norwegian jobs throughout the value chain,” food and agriculture minister Sandra Borch told NRK. 

In addition, shopping domestically means more tax revenue for the Norwegian system to use to fund its generous welfare state. 

While shopping domestically protects domestic jobs, shopping abroad protects jobs there, which rely on people hopping the border to get their groceries. 

Coronavirus pandemic restrictions left a black hole in some of these economies reliant on shoppers from the Norwegian side of the border. For example, in Strömstad, a Swedish town close to the border where many travel to shop, unemployment rose by around 75 percent after Norway closed its borders with Sweden.