LONDON — Europe’s economy may be set to pick up next year — Spain, one of the region’s most troubled countries, has just crawled out of recession — and consumer sentiment across the continent appears to be improving. But if retail and economic experts had one piece of advice for executives doing business in Europe in the first half of 2014, it would be: “Curb your enthusiasm.”
Mario Draghi, president of the European Central Bank, said as much in September: “I am very, very cautious about the recovery. I can’t share enthusiasm. It is just the beginning. Let’s see. These shoots are still very, very green.”
According to the International Monetary Fund, the euro area is expected to pull out of recession gradually, with growth reaching 1 percent in 2014. In its latest economic forecast, the European Commission said real gross domestic product growth is projected to “gain traction” in 2014; however, domestic demand will be constrained.
“In the short run, private investment and consumption are…being held back by uncertainty about the economic outlook, while the weakness of the labor market will continue to weigh on domestic demand going forward,” the EC report said.
Consumers are still carrying serious baggage from the prolonged, Europe-wide recession, while unemployment remains at record high levels — it was 12.2 percent in September. And no one has forgotten the all-too-recent dramas surrounding the single currency, namely the sovereign debt crises in the region.
“Consumer confidence has been improving in the second and third quarters of 2013, and looks likely to continue to do so. However, it remains weak overall,” said Sarah Boumphrey, head of countries and consumers research at Euromonitor International.
“In the first half of next year, consumption is likely to remain weak too — unemployment is high, and disposable incomes are stagnant,” Boumphrey said. “Until the recovery strengthens and unemployment begins to fall, consumption is unlikely to recover. So, while the recovery is welcome news, it is unlikely to translate to significantly stronger spending growth in the short term.”
Nick Hood, a risk analyst at Company Watch, which monitors the health of a variety of businesses worldwide, believes 2014 may well be a year of transition for consumers.
“It could be the year when consumers emerge, blinking, from the recessionary bunker, thinking that maybe it’s time to start enjoying themselves again,” said Hood.
However, he added, “Consumer spending will be constrained, and growth in retail spend will be modest. I can’t see an exciting six months for retail,” he said, referring to the first half of next year.
Inflation is another consideration — in the euro zone, it fell to 0.7 in October, the lowest rate since February 2010, due to a drop in energy costs. The bigger inflation picture is complex.
“Inflationary pressures remain weak, which is good news for consumers’ wallets,” said Boumphrey of Euromonitor. “However, within this overall benign picture, food prices have seen stronger increases, and this does put pressure on discretionary spending, particularly as income growth remains weak and private debt high in many countries. It means that households have limited ability or desire to borrow to fund discretionary spending.”
Much of the projected growth in Europe, modest as it may be, will come from luxury customers, Millennials, Asia and the Middle East. According to the latest Consensus Study by Altagamma, the association of high-end Italian firms, all luxury product categories will notch an uptick in sales next year.
Apparel is forecast to gain 5 percent, jewelry and watches 6 percent, shoes and accessories 7 percent, and fragrances and cosmetics 4 percent. Geographically, Asia and the Middle East are set to notch growth of 10 percent each next year.
Meanwhile, according to Euromonitor’s latest Global Consumer Trends Survey, about 10 percent of European consumers surveyed plan to increase their spending, while most plan to maintain and 40 percent plan to decrease. For the survey, Euromonitor polled some 16,300 Internet-connected consumers ranging in age from 15 to 60 and older, living in Brazil, China, France, Germany, India, Japan, Russia, the U.K. and the U.S.
Eileen Bevis, survey manager at Euromonitor, said across France, Germany and the U.K., Millennials are the most likely demographic to say they plan to increase spending overall, and on product categories such as travel and clothing.
“As their job situations improve, they want to increase their quality of life and pad their savings accounts, though some are comfortable using credit cards to cover any budget gaps,” she said. “Clothing, entertainment and travel show the most potential to elicit spending increases from Millennials.”
Hood of Company Watch said while he does not foresee a new round of shop closures on the high streets of Europe, retailers will not have an easy time capturing the bits and pieces of consumption.
“I don’t see scads of casualties on the high street, and I don’t expect many surprises,” he said. “We had the clearing of the forest in 2012-13. There is stability in the euro zone, Spain is out of recession and the Irish construction sector is growing, something that we have not seen for a while.”
Luxury, he said, is relatively insulated, adding, “It always does well among those who can still afford it, and it remains hugely aspirational. Young fashion retailers, on the other hand, need to be right on the money with their customer experience and product. The customers will spend, but only if those elements are right.”
EXCLUSIVE: Two and half months after John Targon, cofounder and codesigner of Baja East, was hired as creative director of the contemporary division at Marc Jacobs, he has left the company, WWD has learned. Marc Jacobs International, which is owned by LVMH Moët Hennessy Louis Vuitton, confirmed Targon’s departure in a statement: “John Targon is a talented designer and we appreciate the work he has done here. Ultimately working together did not make sense for the brand and we wish him the best.” Read the story by @jessiredale, link in bio. #wwdnews
@theluxurycollection is officially launching a collection, tapping Sofia Sanchez de Betak for the capsule. Over 30 styles will be featured in the Chufy x The Luxury Collection, debuting next month at Bergdorf Goodman, The Webster, FiveStory and more. De Betak, known as “@chufy,” drew inspiration for the collection from her trips to Japan in the past year #wwdfashion
@lhd, founder and CEO of @thewebster, has teamed up with @lebonmarcherivegauche for the European launch of her ready-to-wear line, LHD. The launch will come with an exclusive pop-up opening today that’s set to run through May 20. Located on the second floor, it carries her debut Miami-themed resort collection, launched in November as see-now-buy-now. #wwdfashion
@longchamp, which marks its 70th anniversary this year, just opened its biggest U.S. store on Manhattan’s Fifth Avenue. On the lower level there’s a floor-to-ceiling display of the brand’s iconic Le Pliage bag – in all of its different colors, shapes and sizes. Customers can also have their product personalized in-store by imprinting names, initials or emblems. #wwdfashion (📷: @ericmtownsend)
“Whenever I’m in that place of sound and music, I don’t have fear or nervousness…This album has a lot of themes of courage and boldness and I want to be the soundtrack for people’s lives. I’ll be so happy if [my songs] evoke strength in people, which I know music has done for me,” says @kimbramusic of her newest album “Primal Heart.” The New Zealand-born singer sat down with WWD to talk about her music, newest tour and connecting with hear fans — read more on WWD.com #wwdeye (📷: @jilliansollazzo)
Luxury handbag resale company @rebagofficial is planning to sell a rare collectible for $70,000: the @hermes White Crocodile Himalayan Birkin. The exclusive Birkin sold for about $100,000 in 2008, when @davidbeckham bought one for his wife @victoriabeckham to add to her collection. Read more about the rare Birkin on WWD.com #wwdaccessories
With her costume pearl necklace and what-you-see-is-what-you-get style, Barbara Bush, who died Tuesday at age 92, was a straight-shooter from start to finish.
Born Barbara Pierce in New York City, Bush served as the 37th first lady, as well as the country’s second lady from 1981 to 1989. In addition to being part of the longest presidential marriage — 73 years — Bush also had the unlikely distinction of having one son, George W., become the 43rd president and another son, Jeb, run unsuccessfully in 2016. Having served as second lady during the Reagan administration’s two terms and lived all over the world during her own husband’s ascending political career, Barbara Bush made it clear that literacy — not fashion — was her priority. Read more from Rosemary Feitelberg’s obituary on the late First Lady in WWD.com, link in bio. #barbarabush #wwdnews
Western and ’90s trends have influenced denim for fall 2018. Think raw, dark and coated jeans mixed with bold prints and tough leather. #trendtuesdays #wwdfashion (Styled by @thealexbadia;📷: @ryanplett)