As Europe’s Economies Reopen, Consumers Go on a Spending Spree

PARIS — Clémentine Sebert buzzed through an Ikea furniture store during her lunch break, filling her cart with decorative cushions, a new nightstand, lamps and a small rug. After being cooped up for two months during France’s coronavirus quarantine, she was back to work at the firm where she is a legal counselor — and ready to spend.

“I’m not so worried about the future,” said Ms. Sebert, who returned to her office last month after France’s lockdown was lifted, and was settling into a new rental apartment.

Because of a government program to support businesses during the crisis, Ms. Sebert kept her job and most of her pay while on furlough — a big help in paying for the new purchases. “If I had been unemployed, I wouldn’t be spending as much,” she said.

Consumers in Europe are going on a shopping spree as their economies reopen, offering hope that a fragile recovery from a deep pandemic-induced recession may be taking hold.

Retail sales in the eurozone, which plunged to record lows while millions were confined, surged 17.8 percent in May compared with the month before, as people fanned out to buy furniture, electronics, clothing and computer equipment, Europe’s statistics agency reported this week. The biggest gains are in France and Germany, where spending has rebounded to near pre-confinement levels.

For now, at least, patrons have not stopped flocking to socially distanced sidewalk tables at cafes and bistros in France. Dutch flower and plant suppliers are reporting record demand as shoppers crowd do-it-yourself stores around Europe to beautify their homes. In Germany, families are heading to malls to buy new appliances after the government lowered the value-added tax to stimulate sales.

Consumer spending is crucial to Europe’s revival, accounting for more than half of its economic activity. During previous downturns, business investment and exports tended to be the main drivers of a rebound. But the closure of borders and vast parts of the economy in the coronavirus crisis has hit capital spending and weakened trade, making a business-driven recovery uncertain.

Governments are spending billions of euros to limit the damage, mainly by focusing on policies to limit mass unemployment. France, Germany, Denmark, Italy and most of Europe are now extending through the end of the year short-time work support schemes, like the one that helped Ms. Sebert continue to draw a paycheck.

Ms. Sebert was able to collect 80 percent of her salary while furloughed during confinement, as one of around 14 million workers in France who benefited from the state-backed program. While support in other countries was less generous, the programs have helped cushion income losses for an estimated 60 million people around Europe.

“This is a government-subsidized recovery in spending, but that is exactly the intention,” said Bert Colijn, senior eurozone economist at ING. “If this hadn’t happened, the counter effect would be disastrous. It’s a confirmation that the policy is working as intended.”

The spending wave is already helping to tilt some sectors toward recovery. At Adecco, one of Europe’s largest temporary recruiting agencies, demand for retail and restaurant workers — many of whom lost work during lockdowns — has rebounded sharply since the middle of May.

“Consumption is returning probably due to the fact that the government put a lot of money on the table,” said Christophe Catoir, Adecco’s president for France and northern Europe. As a result, he added, “hiring is coming back.”

Some of the splurge is no surprise: People couldn’t shop or dine out during confinements, and now they can.

Still, with government support programs in place, consumer spending could return by the end of this year to nearly what it was before the lockdowns, said Mr. Schmieding, who has now revised his outlook for the recession from disastrous to merely bad. “For the second quarter, we now pencil in a plunge of 13 percent instead of 15.1 percent for the eurozone,” he said.

Those are still grim figures, and economists don’t expect a return to normal levels until health risks abate, making a full economic recovery unlikely until a vaccine for the coronavirus is found.

  • Updated July 7, 2020

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Mindful of the risks, consumers are remaining cautious. Despite their splurging since lockdowns have eased, consumers have also socked away savings at a record rate, causing bank deposits across the continent to jump, in case things take another turn for the worse. The European Commission expects this increase in savings, which could otherwise be stimulating a recovery, to keep rising.

And not everyone has been able to take advantage of income-supporting furlough programs. Lockdowns and business closures have hit the most vulnerable workers in Europe especially hard, according to a report this week the Organization for Economic Cooperation and Development.

On a recent weekday, Toni Kehler, an administrator at a Munich-based company, made a beeline to the Alexa Mall on Berlin’s Alexanderplatz to check out a new high-definition television that he and his family had been eyeing for a while.

With the German government leading the way in Europe in support programs for companies and workers, a big factor behind his purchase was a sense of security that he wouldn’t lose his job, Mr. Kehler said.

“We had planned on buying this for a while,” he said. “There is no reason not to do it now.”

Théophile Larcher contributed reporting from Paris, and Christopher F. Schuetze from Berlin.

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