Jean-Jacques Vandenheede, European Business Insight Director
According to Nielsen’s latest European Growth Report, the third quarter of 2009 has shown nominal growth at 2.4%—the lowest growth over the past 18 months. Inflation is decelerating, recording a low 1.4% in the third quarter. The inflation rate almost halved compared to the start of the year and is down 0.8 points compared to the second quarter 2009. Deflation has been recorded in 10 markets.
Europe experienced a modest volume growth of 1% in the third quarter, down 0.9% compared to the prior quarter. However, this growth is still ahead of the United States. Volume growth rate is accelerating in the nine countries.
The Big 5 European economies (France, Germany, Italy, Spain, United Kingdom) are showing a mixed picture. Several Eastern European countries (the Baltics, Bulgaria, Croatia, Czech Republic, Ukraine) report a severe volume growth drop over the summer.
Consumer confidence sees a significant rise globally as shown in the latest Nielsen Global Consumer Confidence survey.
Consumer Confidence rose in 45 out of the 52 countries compared to six months ago. After hitting its lowest point of 77 index points in April, confidence began to recover due to massive global stimulus plans in the second quarter.
Nielsen’s latest survey, which polled 30,500 online consumers in 54 countries in early October 2009, showed that global consumer confidence is rebounding, jumping 9 index points in the last six months to 86 since the Q1 2009 survey. Brazil and key Asian markets are posting double-digit increases in consumer sentiment, while the U.S. recorded its first increase in consumer confidence since 2007. Despite this renewed sense of optimism, actual behavior remains restrained; many consumers remain skittish about spending their money, and in some countries, spending habits appear to have changed permanently. Hong Kong posted the largest consumer confidence increase in the third quarter compared to Q2, up 14 points from 79 to 93 index points, followed by South Korea (+13 points) and Brazil (+12 points).
Total European View
Nominal Volume Growth
Growth has been upheld by continued modest volume growth of +1% for the third quarter of 2009. Although this is a decline of 0.9% compared to the second quarter, European volume growth is still ahead of the U.S.
The volume growth rate is accelerating in the following countries: Austria, Belgium, France, Netherlands, Norway, Portugal, Spain, Sweden, and the U.K.
The Big Five European economies are showing a mixed picture. While Italy and Germany are experiencing deflation and volume decline, continued volume increases are occurring in France, the U.K. and Spain (which is offset by slowing inflation).
Several Eastern European countries report a severe volume growth decline over the summer. Ukraine and Bulgaria have had double digit inflation, Croatia and the Czech Republic are experiencing deflation, and a difficult economy has hit the Baltics.
Unit Value growth continues to fall, dropping to 1.3% in the third quarter. This is a significant reduction compared to the highs of Q3 2008 when it reached 6.4%.
Country Analysis – Western Europe
The latest quarterly Europe Growth Reporter measuring volume and value sales in the fast moving consumer goods industry across markets in Europe is showing encouraging signs of improvement with more than half the countries showing positive volume trends.
As the chart above demonstrates, the leading Western European growth countries are Turkey, Norway, Poland, Sweden, the Netherlands, the U.K., and Austria. After a remarkable Q2 recovery, Poland demonstrates a significant drop in volume and nominal growth in the third quarter. After four consecutive negative quarters, France’s volume growth is positive, recording 0.6% for the quarter. Ireland continues its overall negative trends, and Portugal, Spain, and Switzerland all see negative price growth in the third quarter.
Country Analysis—Central and Eastern Europe
The chart above demonstrates growth rates for countries in Central and Easter Europe. Ukraine’s rampant inflation continues, with a unit value growth of 27% (an improvement over last quarter’s 31%) and volume growth at -8%. Bulgaria is experiencing double digit inflation, while Croatia is seeing deflation, and the Baltics (Estonia, Latvia, Lithuania) are facing a difficult economy.
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