Despite initial indications of a slight recovery in 2004, the mood amongst consumers in Germany remained bleak, with total consumption lifting by a sluggish 1.5% to €1,234 billion. German consumers face worrying levels of unemployment, an impotent political situation, which is failing to deliver badly needed reforms, and a price-dominated retail agenda – and as a result continue to save rather than spend. Big-ticket items that can be deferred, and those that are discretionary are typically the items to suffer worst in a consumer downturn. The electricals market, according to our definition, lagged overall consumer spending considerably, with spending declining by 5.8% year-on-year, to €29.8 billion.

The German electricals specialists’ sector saw a slight rebound in 2004, showing positive growth of 0.4% to €14,576 million excluding sales tax, against total retail sales growth of 1.4%. For 2005 data we are forecasting a slight decline for the year to €14,485 million. An increase in VAT scheduled for January 2007 is expected to boost retail sales towards the end of 2006, and many in the electricals industry are expecting to benefit from this. In addition the impact of the football world cup is expected to boost sales of multimedia goods during the year. All in all, the outlook is positive for the electricals sector in 2006.