Europe: Slowdown bites but signs of optimism

The European Commission, off the back of lowering energy prices, easing supply chain issues and strong labour market, reports that the EU economy generated moderate growth in the first quarter of 2023, dispelling fears of a recession. This better-than-expected start to the year lifted the growth outlook for the EU economy to 1.0% in 2023 (0.8% in the Winter interim Forecast) and 1.7% in 2024 (1.6% in the winter). The EC noted that the upward revisions for the euro area are of a similar magnitude, with GDP growth now expected at 1.1% and 1.6% in 2023 and 2024 respectively. 

For the past two years, younger consumers and higher-income consumers report the highest confidence in a rapid economic recovery    

While lower energy prices work their way through the system, helping to bring down manufacturing costs, inflation remains a concern, hitting consumers in the pocket as wages fail to keep pace while leading to further tightening in financing conditions. Bad news when it comes to non-essential, high-ticket purchases such as boats, but beneath the data more nuanced consumer trends are starting to emerge. The latest ConsumerWise research survey*, conducted in May 2023 in five European countries: France, Germany, Italy, Spain, and the UK, reveals an increasingly optimistic consumer outlook on the continent. German consumers, according to the survey, report the highest increase in net confidence, at 13 percentage points (up from –34 in September 2022), as well as the highest level of optimism – 31% of respondents say they expect their country’s economy to rebound within two to three months and grow just as strong or stronger than it was before the conflict in Ukraine began. Meanwhile, French consumers report being the least optimistic, with 29% believing that the current crisis will have a lasting impact on the economy, with the possibility of a lengthy recession. 

As has been true for the past two years, younger consumers and higher-income consumers report the highest confidence in a rapid economic recovery. 

The survey reveals that consumers are tightening their day-to-day budgets and tracking spending to combat the rising cost of living. Intriguingly however, findings also highlight an intent to splurge spend - highest in Germany (where economic optimism is highest) and lowest in the UK. Like their US counterparts, it is young European Gen Zers (born 1997-2012) showing the highest interest in splurging. The survey concludes that many consumers are now ‘saving’ on non-essential daily commodities to spend on luxury items. Inevitably big ticket items such as boats, requires confidence and splurge instincts to be high in older, asset rich generations, where the ‘wait and see’ mentality predominates – a reality born out in our Europe report, which has seen a cooling off in the smaller boat end of the market, more dependent as it is on finance purchases. For boats over 50ft, both power and sail, demand appears to be holding. Boating interest remains high – and there is optimism that as inflationary pressures abate, prices fall and the horizon clears, consumer appetite for big ticket spending will return. For now, the most resilient players appear to be in niche, high-end segments – volume builders operating below 10m are keeping a laser eye on costs and managing production levels. Europe’s autumn/winter shows will be critical.