Soaring furniture sales disguise Europe’s patchy recovery

In his 16 years running the Temahome furniture factory in the foothills of the French Alps, Philippe Moreau has never experienced a surge in demand like the one his company is scrambling to keep up with now.

Orders for its flat-pack wooden tables, shelves and desks have soared since the coronavirus lockdown was lifted in May, rising on average more than 40 per cent above pre-pandemic levels. 

“We have a big backlog, which we are trying to reduce by working on Saturdays, reducing holidays, shortening the production cycle and hiring more staff,” said Mr Moreau, who is also head of the French furniture makers trade body. “There is real momentum — it is not just a catch-up of sales lost during the lockdown — we believe this is going to last.”

Driven by people spending more time at home during lockdown and the shift to remote working, furniture sales have shot up across Europe, contributing to a rebound in overall retail spending back above last year’s levels in many countries.

However, the rapid recovery in spending on goods only tells part of the story. Eurozone consumer confidence is still subdued, prices are falling, spending on services such as travel, restaurants and bars remains in the doldrums, while household savings are rising at record rates.

“Even though retail sales have recovered back to pre-pandemic levels, that does not mean that overall household spending is recovering to the same extent,” said Katharina Utermöhl, economist at German insurer Allianz. 

There are also worries that a resurgence in daily coronavirus infection levels across Europe, caused by increased socialising and summer travel, is leading to fresh restrictions that could stymie the nascent recovery.

Nowhere is this contrast more apparent than in France, where rising sales of electronics, bicycles and furniture are set against vastly increased consumer saving rates.

Furniture sales in France rebounded so strongly after the country’s lockdown ended that by July they were more than a fifth higher than the previous year, Mr Moreau said.

Sales of electrical and computing equipment also shot up. After the French electronics retailer Fnac Darty reopened its domestic stores in May, sales rebounded to 25 per cent higher than last year, while online sales have risen 85 per cent. 

In last week’s monthly economic sentiment survey by the European Commission, France showed the biggest rise among the bloc’s main economies, driven by a confidence surge in the services and retail sectors. However, overall consumer and business sentiment remains well below historic averages in France and across the eurozone.

Eurozone’s economic sentiment continued to improve in August

Many areas of the French economy remain in crisis mode. The country’s cafés, bars and brasseries lost 84 per cent of their revenue in the three months to June, according to the trade body for independent restaurants and hotels in France. The losses were even greater for restaurants and hotels, it said, warning that 200,000 jobs could be lost.

The sudden jump in savings is a clear sign that French consumers are worried about the future. While household disposable income in France suffered its biggest quarterly drop for more than 70 years, the savings ratio shot up from an average of 15 per cent last year to 27.4 per cent in the three months to June.

Chart showing rise in eurozone bank deposits

Savings are rising across Europe, with household deposits at eurozone banks increasing 7.4 per cent in the first half of the year, according to the European Central Bank. However, new French household deposits were 77 per cent higher than in the same period last year, compared with increases of about 12.5 per cent in Germany and Italy, and less than 7 per cent in Spain.

A heavy fall in household spending contributed to a historic 12.1 per cent contraction in the eurozone economy in the second quarter. Italy this week said household consumption had fallen 11.3 per cent between April and June, as it revised its estimate for the quarterly contraction in its economy to 12.8 per cent, up from 12.4 per cent. 

So far, the official unemployment rate has only ticked up across the eurozone since the pandemic hit, rising from 7.4 per cent in April to 7.9 per cent in July. But this is because vast numbers of people are on furlough schemes or have stopped looking for work.

In Spain, figures released this week showed a 75 per cent drop in the number of international visitors in July compared with the same month a year ago. On Tuesday, the government said it was seeking to extend its furlough schemes, which are due to expire at the end of this month. At the schemes’ peak in spring, some 3.5m people were covered, but the government says some three-quarters have now returned to work. 

Since peaking at 8.8m people in April, the number of people on France’s scheme had fallen to 2.4m in July. Yet economists fear that this may have delayed, not averted, job losses.

“People are very worried about losing their jobs in France,” said Gilles Moëc, chief economist at French insurer Axa. “Even though consumer confidence has been increasing, the perception of the labour market is deteriorating — people know this is an artificial situation and they are bracing themselves for a worsening of the labour market after the summer.”

Additional reporting by Daniel Dombey in Madrid

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