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Europe’s economic growth engine is clearly losing steam, but that doesn’t prevent its citizens from enjoying one of their favorite past times: globetrotting.
“Germans are often considered the world champions of travel,” Eric Heyman, senior economist at Deutsche Bank, told clients in a note Thursday. Citing the country’s balance of payments data, he said Germans spent a record 96 billion euros ($104 billion) on overseas travel services for both business and tourism in 2023.
This is 15% higher in nominal terms than pre-pandemic levels in 2019, offsetting losses due to COVID-19. While rising prices are likely pushing up the numbers, Heyman said the numbers are still “remarkable.”
It’s the same as Germany falling into a bit of a rut. Citing “difficulties” in the eurozone’s biggest economy, the government has lowered its growth forecast for 2024 from 1.3% to 0.2% – after last year’s economic growth contracted by 0.3%.
Deputy Prime Minister Robert Habeck said the economy was slowly recovering from the loss of Russian natural gas after the country invaded neighboring Ukraine, and although energy costs were falling, there was still a slowdown in global trade and a decline in skilled labor. He said Europe is facing a shortage of workers and high interest rates. .
Suffering from rising energy costs and falling real incomes over the past few years, Germans’ savings rate rose from 11.1% in 2022 to 11.3% last year, Heymann said. However, Germans are not the biggest savers in Europe, at least until 2022, when Switzerland held that title.
“Despite all this, post-pandemic holiday fever has clearly been so strong that households are spending a higher proportion of their disposable income on international travel than before,” the economists said. That spending was 2.9% in 2023, 2.7% in 2022, and 1.4% in 2021.
However, travel receipts from the rest of the world are still 9% below 2019 despite rising prices, so the trade balance for travel services reached a record deficit of €62 billion last year. said the economist.
Spending on overseas travel in Germany is expected to rise again in 2024, despite some households having to cut spending or give up holidays altogether, according to early data. There is. Heyman cited strong long-haul travel bookings earlier this year and said wealthy people often spend their increased income on travel, likely offsetting travel cuts elsewhere. Stated.
“Finally, not every euro spent on travel services abroad can be spent at home. Germany’s wanderlust is therefore likely to be due to the fact that the growth rate of personal consumption in 2024 is low, even though real incomes are increasing. “That’s one reason why we expect it to be less than 1% in real terms,” he said.
More gloomy data on Thursday showed Germany’s HCOB General Purchasing Managers Survey hit a four-month low of 46.1 in February, well below expectations of 47.5 as the manufacturing sector continues to struggle. . A number below 50 indicates contraction, and the PMI indicator has been below that level for eight consecutive months.
“Manufacturing is holding back the entire economy.”
This is more than compensated for by the services sector,” said Tariq Kamal Chowdhury, an economist at Hamburg Commercial Bank.
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