Tuesday, January 06, 2009

Growth Expectations

The last few weeks I spent in good old Europe which enabled me to experience the different expectations and attitudes of societies in today’s tough economical climate. It showed me that expectations for economical growth differ more vastly by country than most people believe. 

Last week the prime time news show in Germany had two separate reports about the retail environment in Germany and the US within 10 minutes. First, the news show reported an assessment of the holiday season in Germany with an overall very upbeat tone. It showed a few retail experts that estimated a flat to slightly negative sales growth over the previous holiday season. It quoted one retail executive who expressed strong satisfaction with the season and its rather surprising success (only slightly negative growth or even flat!). 

A few minutes later a report about the US retail season showed a very different picture with a completely different tonality. The reporter mentioned the expectation of a 2% sales decline for the holiday season in the US and portrayed an absolutely abysmal picture for US retailers. The report stressed how devastated US retailers are and how US consumers stopped shopping over the last months. 

How can a 1% difference between sales growth in Germany and US over the holiday season justify such different reports? Cultural differences! Germans are not as growth oriented as Americans. For most Europeans no or slow growth does not equal complete disaster for failure while most Americans can not imagine an economy that does not grow substantially. This attitudes explains the stronger willingness of Americans to go into debt to maintain a strong growth rate whereas most Europeans don’t value growth itself that much to put aside all other values.   

Economists are currently predicting the long-term GDP growth downwards and are expecting a more normal annual average growth of around 3%. But most Economists are not taking in consideration the different mind sets of consumer expectations in regards to growth that is influencing the actual growth by country. It would be interesting to quantify more scientifically the different growth expectations by country and compare it with the actual growth rates.  

2 Comments:

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