Germany’s consumer confidence hits all-time low, 50% of companies on short-time work

LONDON (ICIS)–Germany’s consumer confidence has fallen to an all-time low, and about 50% of the country’s companies have now introduced short-time work, according to the latest surveys on coronavirus impacts on Thursday.

The pandemic and the measures introduced to contain it hit consumer sentiment hard in April, Nuremburg-based market research firm GfK said.

Consumers’ income expectations and propensity to buy are in freefall, pushing the GfK consumer confidence barometer for Europe’s largest economy to a historic low of minus 23.4 points – down 25.7 from 2.3 points in March.

Data for the April survey were collected during the first two weeks of the month when consumers were feeling the full impact of the containment measures such as closures of schools and businesses, production shutdowns and restrictions on leaving their homes.

“The consumer climate is currently in freefall. A value of -23.4 points is unprecedented in the history of the consumer climate to date,” the group said.

German retailers, manufacturers and service providers needed to prepare for “a tough recession in the immediate future,” it added.

SHORT-TIME WORK
Meanwhile, 50% of German companies are introducing short-time work (“Kurzarbeit”) while others are planning permanent job cuts, Munich-based research group ifo reported in a separate survey.

In trade, employees at 55% of companies currently have short time work arrangements, in manufacturing 53%, in services  48%, and in construction 37%.

At the same time, 18% of companies surveyed plan to lay off employees or not extend fixed-term jobs.

Also, of the companies surveyed, 46% plan to postpone investments – 56% of companies in manufacturing, 44% in services, 38% in trade, and 31% in construction, ifo said.

The only winner during the coronavirus crisis is working from home, with 76% of companies increasing use of this option, the group said.

GOVERNMENT BOOSTS ALLOWANCE
In related news, Germany’s federal government agreed on Wednesday to raise the short-time work allowance, or “Kurzarbeitergeld”.

If short-time work lasts several months, and depending on other factors, the allowance can now reach up to 87% of the usual salary or wage.

Under Kurzarbeit, employers temporarily lay off workers or cut their hours, with the loss of salaries and wages being partially offset by the allowance.

Many companies choose short-time work, rather than permanent layoffs, to cushion them from short-term sales losses – enabling them to retain their workforce and be ready when business recovers.

Meanwhile, research group IHS Markit reported on Thursday that its provisional eurozone composite purchasing managers’ index (PMI) fell to a record low in April amid the coronavirus lockdowns and plummeting global demand.

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