Consumption around the EM Will football boost the economy?

Status: 11.06.2021 09:55 a.m.

Normally, major sporting events create a special boom in the economy. At the EM this year it will be a little different. From Notker Blechner, tagesschau.de Actually, the “Euro 2020” should stimulate Europe’s economy, especially tourism. For the first time, the European Football Championship will take place in several countries – so the organizers originally hoped that thousands of fans would travel across Europe, go out to eat, shop and stay in hotels. But because of the corona pandemic, this calculation no longer works. Most cities will have a limited number of viewers. Many fans refrain from traveling and prefer to stay at home in front of the television at home.

Only limited economic stimulus

The direct economic effects on the host countries of the EM are likely to be limited. The travel industry, gastronomy and hotel business are not expecting a large boost from foreign guests. Even in the only German European Championship host city Munich, the expectations are not too high. Especially since there was no special boom for the construction industry in the run-up to the tournament – unlike at previous events. Most of the stadiums have not been specially modernized for the European Championship, as is usually the case with major sporting events. The infrastructure in the host cities was also not extensively renovated. “Since the games are being played all over Europe, there was no need to invest heavily,” explains Gert Wagner from the German Institute for Economic Research (DIW) tagesschau.de .

No million investments in infrastructure and stadiums

It was different at the previous European Championships: For the Euro 2012 in Poland and Ukraine. Ukraine invested eleven percent of their gross domestic product and Poland seven percent in the expansion of the stadiums and infrastructure, as the Berenberg Bank has calculated. However, the hoped-for economic boom did not materialize afterwards – at least in Ukraine. The 2016 European Championships in France were more successful: hosting the tournament in their own country cost a good 200 million euros in public expenditure. This contrasted with 1.2 billion euros in revenue. According to an estimate by the European football association UEFA, half of these came from foreign visitors. Not included in the balance sheet, however, are the costs of 1.6 billion euros for the construction and modernization of the French stadiums. This time, the EM should bring the greatest impetus to domestic consumption. Many Germans are expected to spend more money on new televisions, beer, chips, grilled food and maybe a few fan items in June and July in order to watch the European Championship games in their own four walls or in the garden at home. “Basically, consumer goods companies that do a lot of advertising benefit, sporting goods outfitters, food manufacturers and of course beer brands that do particularly well when the weather is good. When there is a barbecue, more beer is drunk,” says capital market strategist Oliver Roth from banking house Oddo Seydler.

More business with TV sets?

According to a survey by the trade association HDE, 41 percent of electronics retailers expect higher sales. Because experience from past major sports events shows that “before and after the start of the tournament, particularly large TV sets are purchased”, according to the market watchers from Nuremberg-based GfK. Electronics retail chains such as MediaMarkt Saturn are already feeling “an increasing interest in large-format TV sets”. After the end of the corona lockdown, the Germans’ desire to consume is likely to reawaken anyway. During the pandemic, many German citizens had no way of spending their money on travel or expensive restaurant and concert visits.

Brewers increase their capacities

Other industries also believe in an EM effect. Every third grocer is hoping for more income from the European Championship, according to the HDE survey. The brewers in particular have increased their capacities and are hoping for good summer business. However, Corona continues to get in their way. Because public viewings, where the beer flows freely, will probably only take place on a small scale. So far, “our business has only been running with slowed-down foam,” explains Holger Eichele, General Manager of the German Brewers’ Association. The sporting goods manufacturers are traditionally considered to be the greatest beneficiaries of a European Football Championship. Adidas, Nike, Puma & Co have been preparing for months with extensive marketing and advertising campaigns for the sporting event of the year. The further the national team they have equipped goes, the better business with the jerseys is. Adidas and Nike deliver a duel here. The brand with the three stripes has three favorites for the title: Spain, Belgium and Germany. Nike can score with world champion and title contender France as well as with secret favorite England. Adidas also provides the official match ball, the Uniforia.

It depends on the cut

How big the consumption effect is in different countries ultimately depends on how well your own team performs. Should the kickers of the outgoing national coach Jogi Low manage a new edition of the “summer fairy tale” from 2006 or 2014, the consumer mood in Germany is likely to jump even stronger. In the betting offices, however, the Löw team is only considered an outsider this time. In the past, winning a World Cup or European Championship title not only boosted consumption, but also infected the stock markets. The stock market of the respective European or world champions usually developed better than the MSCI World Index after the tournaments. DIW economist Wagner, however, considers the psychological impulse to be the most important: “We will get a demonstration that we have the pandemic largely under control in Europe. That will be an important signal.”

Production drops slightly A lack of material slows down industry

As of: June 8th, 2021 12:32 p.m.

It sounds paradoxical: the order books are full, but production in German industry fell in April. The main reason is the supply bottlenecks for intermediate products such as semiconductors or lumber. In April, industrial production in the German economy fell by one percent compared to March, according to the Federal Ministry of Economics. That is significantly worse than experts had forecast, after a plus of 2.2 percent had been recorded in the previous month. The reason for the decline is the lack of intermediate products such as, which has been widely discussed for a long time Semiconductors or Lumber , which the companies from industry, construction and troubles the energy suppliers.

“A slight disappointment”

The sectors are affected differently by this development. Industrial emissions fell by 0.7 percent. The construction industry recorded a significant minus of 4.3 percent. Energy generation, on the other hand, increased by six percent compared to the previous month. Within the industry, the weighty area of ​​motor vehicles / motor vehicle parts recorded a significant decline of 5.6 percent in a two-month comparison, according to the press release. The comparably weighty mechanical engineering sector, on the other hand, was only slightly below the previous level at minus 0.3 percent. “In view of the high order backlog, that is a slight disappointment,” commented LBBW economist Jens-Oliver Niklasch on the current economic data. This is also how his colleague Alexander Krüger from Bankhaus Lampe sees it: “It is paradoxical: Despite the magnificent order situation, production is not getting underway. Once again it is clear that the industry is still affected by indirect pandemic pressure. Longer delivery times and material bottlenecks are actually signs a boom that is currently not at all. ”

“Material shortage has a full impact”

Thomas Gitzel, chief economist at VP Bank, is of the opinion that the shortage of materials is now having an impact: “Such a constellation is unparalleled. The industry’s order books are well filled and production is giving way.” Nils Jannsen, Head of Business for Germany at the Kiel Institute for the World Economy (IfW Kiel), also sees the delivery bottlenecks as a major problem, as the companies have not been able to fully process the high incoming orders for several months. “In April, the proportion of companies in the manufacturing sector that reported production disruptions due to a lack of preliminary work was at a record level of more than 40 percent,” said the expert. In addition to the shortage of manufactured intermediate goods, Jannsen also observes transport bottlenecks in shipping. For Andreas Scheuerle, an expert at Dekabank, another aspect is also effective: “Delivery bottlenecks certainly hampered production in April. But they alone do not explain the lower industrial production. Another part of the picture is that the infection situation in Germany is continuing tightened the easing of March again. ”

Production expectations are falling

How could it go on in the future? Apparently, there is a certain skepticism among companies: The production expectations of the industry deteriorated in May after a 30-year high had only been reached in the previous month. The corresponding ifo indicator fell by five to 27 points, as the Ifo Institute announced in its monthly survey of companies. “The picture of production expectations in the individual sectors is very different,” said Ifo expert Klaus Wohlrabe. “The auto industry and its suppliers are significantly lowering their expectations, but continue to expect production increases.” The clothing manufacturers, on the other hand, report for the first time after nine months that they want to expand their production. “Additional boost” The economist Scheuerle emphasizes that the order cushion increased again in April, because orders would develop more strongly than production: “This record high order backlog will secure the recovery in the second half of the year as soon as the bottlenecks ease again.” According to ifw specialist Jannsen, it is currently difficult to predict how long the production disruptions will continue. They would presumably only fade gradually and initially put a brake on the recovery in industry. “As soon as these impairments have been overcome, companies will work off the backlog of orders quickly and industrial production will receive an additional boost.”

In view of the progressing vaccinations, the German industry expects the economy to pick up significantly in the coming months. In terms of production, he expects “a strong plus of eight percent compared to the previous year,” said the President of the Federation of German Industries (BDI), Siegfried Russwurm, at the opening of the Hanover Fair. At the start of the corona-related digital industrial fair, the BDI, the Association of German Mechanical and Plant Engineering (VDMA) and the Central Association of the Electrical and Electronics Industry (ZVEI) presented their annual forecasts.

When will the upswing come?

In the past few months, German industry has been an important driving force behind the economic recovery in Germany. That is why the current forecasts of the three major industry associations were awaited with great excitement. And although the big upswing is likely to be a long time coming, the prospects for the industry are better than feared – provided, according to the unanimous assessment of the associations, that the lockdown measures do not need to be tightened any further. The forecasts are based on the assumption that the previous restrictions will be scaled back in the coming months and that vaccination will be successful.

“No further conditions”

Many companies received significantly more orders again, said BDI President Russwurm. There are already more incoming orders than before the crisis. A prerequisite for recovery is “largely reducing pandemic-related restrictions by early autumn” – and that there are no further requirements for the manufacturing industry. With the help of general practitioners and company doctors, Germany must also become more flexible and speed up when it comes to vaccinating. Russwurm also pointed out that the extended lockdown would have consequences in a number of areas. According to the updated BDI forecast, economic output is likely to increase by three percent in 2021. That is half a percentage point less than initially assumed.

Increased prognosis

The Association of German Mechanical and Plant Engineering (VDMA) has increased its forecast for the production volume in 2021 by around three percentage points to up to seven percent. Above all, the good demand from Asia, especially from China, is encouraging. In the USA, impulses would come from the economic stimulus program launched by President Joe Biden. “The EU is also recovering step by step, albeit a little more slowly,” said association president Karl Haeusgen. However, he restricted the fact that Corona still unsettled and burdens companies. In addition, there would be structural change in the automotive industry and, in some cases, delivery problems. “However, mechanical engineering is showing itself to be resilient even in this difficult phase.” The VDMA boss warned politicians to implement uniform pandemic regulations and develop a long-term strategy. “However, it now also needs unity, clarity and concrete political plans for the time after.”

Positive mood in the electrical industry

ZVEI President Gunther Kegel was also confident for the electrical industry. “The electrical industry got off to a positive start in 2021,” said Kegel. This year a production increase of five percent could be achieved. “If you look at the orders received in the first three months, things can possibly go even better.” Capacity utilization was almost back at the previous year’s level at 82 percent in the first quarter of 2021. Incoming orders also generated optimism. In February alone there was an increase of 13 percent over the previous year. On the debate about mandatory corona protection requirements in the industry, Kegel said that over 90 percent of the companies in his industry were already testing. “This means that another tightened lockdown is not only unnecessary for the industry, it also makes no sense.”

Networking and automation as a topic

The fair in Hanover is considered to be the largest industrial show in the world. In online presentations, live streams from exhibitors, numerous video conferences and a new networking tool, the companies focus on technologies for networking and automation in production and logistics. In particular, contributions for more energy efficiency are to be shown. Economic policy rounds, specialist lectures and panel discussions are also planned.