Germany sees World Cup half-empty

Germany's World Cup triumph failed to uplift the economy. (Laurence Griffiths, Getty)

Germany's World Cup triumph failed to uplift the economy. (Laurence Griffiths, Getty)

As Germany’s captain Philip Lahm lifted the World Cup trophy up to the heavens inside the Maracanã stadium on July 13, many at home hoped the sporting triumph would also boost the national economy. But a month on, analysts say the much-talked about “World Cup effect” has been exposed as a myth.

Last week, Germany’s shock 0.2% contraction in gross domestic product (GDP) sealed the gloom, flattening in the process the eurozone’s first-quarter GDP growth.

“Germany winning the World Cup may have improved the general mood in the country in the short term, but it hasn’t had any noteworthy impact on consumer confidence,” said Rolf Gurtl of market analysts GfK.

According to other analysts, the deterioration in German-Russian business has dampened optimism among businesses and consumers.

Mannheim’s Centre for European Economic Research (ZEW) economic sentiment index registered a 12-point drop for August, the biggest since June 2012. “The decline in economic sentiment is likely connected to the ongoing geopolitical tensions that have affected the German economy by now,” the centre said.

Peak before the World Cup
Another reason for the footballing triumph’s limited economic knock-on effect is that German consumer confidence may have already peaked before the tournament.
In July, GfK reported that German optimism about rising wages had reached its highest level since reunification.

The wider trend is illustrated in the fortunes of Adidas: from a sporting perspective, the sportswear giant had a “dream tournament”, according to spokesperson Lars Mangels. It backed the winning team, the runners-up, the top scorer, the best goalkeeper and the best player – all of whom wore the trademark stripes.

After the final, the Bavarian manufacturer announced its football division was expecting to make a record turnover of €2-billion this year, having already sold more than two million Germany shirts, 30% more than in 2006, its previous record year. The day after the final, the value of Adidas shares rose by 2.7%

Nonetheless, Adidas shares dropped by 10% when the company issued a profit warning at the start of August, blaming poor performance in its golf business and the volatile Russian market. “In the end, even winning the World Cup couldn’t fend off problems in other parts of the business,” said Mangels.

Germany’s Electrical and Electronic Manufacturers’ Association said it had registered an increase in the sale of TV sets in May, but said it was not clear whether Germans were buying them for the big tournament.

Germany’s brewers registered their best beer sales in four years for June. “But a hot summer is much more likely to make the difference than a successful World Cup,” said Deutscher Brauer-Bund’s Marc-Oliver Huhnholz. – © Guardian News & Media 2014

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