In December 2010, I wrote here about a potential equity theme: German consumption, as labour force was set to expand for the first time in years thanks to new-EU members led immigration.
The impact, I followed, could be that German retail sales would turn up and property prices could expand, as demand increased. A vehicle I chose was Praktiker.
Although I got it right on the main point, German focused retailers have been stock market catastrophes and Praktiker is now battling for survival. So far for the stock picking, sadly!
Depending on sources, German property prices seem to have gone up 5-6% in 2011 while retail sales rose 1.7%, the 3rd positive successive reading (see below).
On the labour force front, without seasonal adjustments, the labour force comprised 41.1 million people in February 2012. Compared with the previous year, the labour force expanded by 587,000 or 1.4%, the Federal Statistics institute reveals.
=> There is therefore a real increase playing through.
Can this finally materialise?
If you believe in the David Ricardo approach, then households and corporate react to the indebtedness of the government by raising saving ratios when the latter is profligate. The German federal government is on the road to a balanced fiscal outlook.
Therefore, this should prompt more spending from households and corporate as they become less worried about potentially higher future taxation.
However, as my Praktiker example highlights, there need to be effective management which has not seemed to be the case for Metro, Praktiker and the rest.
I still find the DIY retailing could be a good vehicle since it is less vulnerable to online entrants and since the German market should be well supported in the coming year. So maybe, we should invest with Hornbach since most of their sales lie in Germany, Austria and Switzerland.
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