Consumption slumped in the Corona year

Closed shops, little chance of vacation travel: Germans spent billions less euros on private consumption in the past year. The service sector in particular was affected.

On average, consumers spent at least 1250 euros less on consumer spending last year. This is the result of calculations by the Institut der Deutschen Wirtschaft (IW). In total, this corresponds to a decrease of 116 billion euros, according to a study by the employer-related research institute. The percentage decline in spending was 6.1 percent compared to 2019, the biggest slump in 70 years. “Short-lived consumer goods” such as clothing or shoes were particularly hard hit by the decline, according to the study. The purchase of durable consumer goods such as cars or furniture also declined in the course of the first lockdown, but demand in the second half of 2020 increased by five percent compared to the previous year. The temporary VAT cut could also have had a stimulating effect on consumption.

Service providers hit particularly hard

The service sector was hit particularly hard by the lockdown measures in 2020. In 2020 as a whole, the decline totaled 78 billion euros, according to the IW. That is more than two percent of the German gross domestic product. “The state-decreed closure of body-related services, restaurants, hotels, leisure and event facilities have made many consumer wishes impossible,” said IW scientist Hubertus Bardt. The data confirm a study by the Federal Statistical Office in March. This had also indicated that the development in the Corona crisis differs significantly from that in the financial and economic crisis of 2008/2009. At that time, private consumption was less affected and even proved to be a pillar of the German economy.

It will continue to save

The researchers do not yet see a fundamental recovery in the propensity to consume in German private households. For the first quarter of 2021 they put the consumption shortfall at a further 40 to over 60 billion euros. According to a survey carried out by the IW together with other research groups, 43 percent want to save the part of their income that remains after basic expenses. Usually it is less than 30 percent. In addition, only a third of those surveyed stated that they currently plan to spend on vacation – usually 45 to 50 percent.