August 2024

Industry trends
Consumer durables / retail
Advanced markets
show signsof recovery
in consumer
spending

Global overview
Growth continues, but credit risk among
retailers of consumer durables remains
elevated.
In 2023 sales of global consumer durables
were impacted by ongoing inflationarypressures. High interest rates also weighedon household real incomes and consumer
confidence across most of the world.
However, consumer confidence in the
eurozone and the US has rebounded since theend of last year, supported by higher wages,
lower inflation, and increased employment
opportunities.

We expect consumer durables sales inadvanced markets to rebound further
in H2 of 2024 and to accelerate in 2025.
That said, growth in the Asia Pacificregion will continue next year, but cool
down somewhat compared to 2024 (seechart overleaf), mainly due to lower
demand in China.
On a global level, downside risks
remain, such as tumbling stock markets,
increasing unemployment and volatilecommodity prices. All this could rein inhousehold spending.

The credit risk of consumer durables retailers
in advanced markets remains elevated, withsmaller players especially vulnerable todefaults and insolvency. The sector operates
in a fiercely competitive environment
with thin margins. These are being further
squeezed by more frequent markdowns, asconsumers seek discounts year-round. At
the same time online retailers are increasing
their market share, putting pressure on
bricks and mortar operators. According to theInternational Trade Association, consumer
goods sold online account for about 22% of
total global retail sales in 2024.

Industry performance forecast
Europe1Asia and Oceania

Americas

Austria

Netherlands

Australia

Phillippines

BrazilBelgium

PolandChina

Singapore

CanadaCzech Republic

PortugalHong Kong

South Korea

MexicoDenmark

Slovakia

India

TaiwanUSA

FranceSpain

Indonesia

ThailandGermany

SwedenJapan

UAE

Hungary

Switzerland

Malaysia

VietnamIrelandTurkeyNew Zealand

Italy

UK

Excellent
The credit risk situationin the sector is strong /business performance in the
sector is strong compared toits long-term trend.
Good
The credit risk situationin the sector is benign /business performance in the
sector is above its long-term trend.
Fair
The credit risk situationin the sector is average /business performance in the
sector is stable.
Poor
The credit risk in the
sector is relatively high /business performance in the
sector is below its long-term trend.
Bleak
The credit risk in the
sector is poor / businessperformance in the sector is weakcompared to its long-term trend.

August 2024

Industry trends
Consumer durables / retail
Consumer durables:
Global key figures

2022

Production

Gross output (sales)(real, USD)

3.1

3.6

2023

2024*

2025*

Consumer durables:
Gross output (sales)
per region

3.2

2.5

Asia Pacific

1.4

3.4

2.4

6.0

4.5

3.7

4.6

3.9

-0.2

2022

2023

3.6

3.2

2024*

5.5

5.5
EU and UK

-2.8

0.6

2025*

2.5

2.6

15.0
Investment(real, USD)

Gross operating
surplus (profits)

0.0

0.2

North America

0.6

-1.0

-0.2

South America

-5.0

-0.5

-2.7

1.9

1.6

Year-on-year, % change /*forecast
Source: Oxford Economics

Year-on-year, % change /*forecast
Source: Oxford Economics

Strengths and growth drivers

Constraints and downside risks

Emerging markets growth. Urbanisation and the number of
middle-income families is growing, driving demand for consumer
durables in the coming years. This, together with increasing
internet penetration and digitalisation, will make many emerging
markets attractive for retail investment.

Elastic demand. Compared to essentials like food, demand for
consumer durables is more closely aligned to incomes, prices andeconomic cycle volatility.

New technologies. Retailers can leverage AR/VR technology
to create immersive shopping experiences and chatbots forconversational commerce, enriching the brand-consumer
relationship through one-to-one interactions. Conversing with
consumers at scale makes chatbots a strategic medium forcustomer engagement.
Sustainability. Sales of eco-friendly recycled and refurbishedgoods provide an increasing business opportunity for retailers.
Higher consumer acceptance is likely to result in increased
competitiveness for retailers.

2

Margin issues. In many markets, retail profit margins are
structurally thin and under pressure. In a fiercely competitiveenvironment, the bargaining power of online retailers is increasing,and their price transparency is adding pressure to margins along
the whole value chain.
Higher input costs. Retailers in many markets are facing higher
costs for logistics, labour and energy.
Business realignment. Brick-and-mortar retailers need to expand
their online business, enhance their digital capabilities and possiblyoffer additional services if they are to survive in today’s digitalworld. However, this requires major investment and the willingness
to change; a difficult task amid tight profit margins, especially forsmaller retailers.

August 2024

Consumer durables /retail outlook
Americas
Consumer durables gross output (sales)

2022

2023

2024*

2025*

Brazil

-11.4

-0.3

-2.3

-2.0

Canada

5.8

-8.8

-3.7

-3.0

Mexico

-4.6

-0.5

0.9

2.6

CanadaUnited States

1.4

-0.2

-0.1

1.7

MexicoYear-on-year, % change /*forecast – Source: Oxford Economics

USA

MexicoHigher consumer confidence after theelections

We expect US consumer durables sales
growth to level off in 2024, followed by a
1.7% increase in 2025. Consumer electronics
sales will grow 4% in 2024, followed
by a 3% decrease next year. Domestic
appliances sales are expected to shrink
2.2% this year, but to grow 3.3% in 2025.
For the furniture segment, a 2.5% increaseis expected in 2025 after a 0.4% decline in
2024. Despite the recent softening of the
US labour market we expect US consumers
to keep on spending, supported by gradualdisinflation and modest wage gains.

After contractions in 2022 and 2023,
we expect consumer durables sales toincrease by 0.9% in 2024 and 2.6% in 2025.
Consumer confidence has increased after
the June 2024 presidential and generalelection, reflecting the expectation thatthe current economic policy will be
continued. Remittances remain high,while the recent start to easing of themonetary policy by the Central Bank
should support household consumption.

For US retailers supply chain and inventory
challenges have abated, but they arefacing other headwinds. There has been
an increase in distressed debt exchanges
by retailers recently. High interest rates
are another challenge for companies
loaded down with debt. Inventories thatare not properly managed could lead tolower profit margins and higher credit
risk. Bricks-and-mortar retailers continue
to lose share to ecommerce. This segment
remains vulnerable to bankruptcies due tosupply chain and inventory challenges, aswell as macroeconomic concerns.

3

BrazilUSA

Spending to accelerate in 2025, but
retailers are facing headwinds

Consumer price inflation is forecast to ease
to 2.9% in 2024 and 2.5% in 2025, compared
to 4.1% in 2023. However, slowing jobs
gains, worsening household finances andstubborn inflation are downside risks
that potentially could weigh on consumer
spending.

Industry performance forecast

Excellent
The credit risk situation in the
sector is strong / businessperformance in the sector is strong
compared to its long-term trend.
Good
The credit risk situation in the
sector is benign / businessperformance in the sector
is above its long-term trend.
Fair
The credit risk situation in the
sector is average / businessperformance in the sector
is stable.
Poor
The credit risk in the sector
is relatively high / businessperformance in the sector
is below its long-term trend.
Bleak
The credit risk in the sector ispoor / business performancein the sector is weak compared
to its long-term trend.

August 2024

Consumer durables /retail outlook
Asia Pacific
Consumer durables gross output (sales)

2022

2023

2024*

2025*

China

1.9

6.4

6.4

1.8

India

7.4

-9.2

14.7

5.5

Indonesia

-1.6

3.5

4.0

6.1

Japan

3.2

-0.5

-1.8

1.3

Year-on-year, % change /*forecast – Source: Oxford Economics

Industry performance forecast
Australia
China
Hong Kong
India
Indonesia

China

India

Sluggish domestic consumption dampens
growthOngoing growth and good long-term
prospects

We expect consumer durables sales toincrease by 6.4% in 2024. However, thisgrowth is mainly driven by exports, while
domestic sales are subdued. Consumer
confidence has weakened in the course ofthis year, mainly due to the ongoing issues in
the property sector, where home buyers areconfronted with negative wealth effects due
to price pressures.

Sales of consumer durables are predicted
to rebound by 14.6% in 2024, after a 9.2%
decline last year. The recovery is driven byhigher sales of domestic appliances andfurniture (up 12% and 20% respectively).
Consumer durables growth is forecast tocontinue in 2025, by 5.5%.

The deflationary environment and higher
unemployment (in particular among younger
people) additionally put a brake on consumer
spending. That said, Chinese consumer
durables consumption still cannot be called
subdued by the standards of other major
economies.
While exports have relieved some pressure
on manufacturers, allowing them to ship
excess supply, we expect that this momentum
may not last. Higher tariffs on Chinese
exports to the US after the presidential
elections in November are a downside risk.
We expect Chinese consumer durables sales
in 2025 to slow down to 1.8% year-on-year,with consumer electronics and furnituresales growing 2.1% each, while domestic
appliances sales are forecast to level off.

Japan
Wage increases drive a rebound in 2025
We expect consumer durables sales in Japanto decrease 1.8% in 2024, followed by a 1.3%
rebound in 2025. Private consumption
should pick up in the coming months,
partly driven by a whopping 5.6% pay
increase agreed in the “shunto” spring wage
negotiations. However, in the long-run theageing and declining population size will
mean weaker consumption prospects.
4Over the coming years, households are
expected to shift their spending focus more
towards services, including travel andleisure, rather than physical goods. Thatsaid, the long-term outlook for consumer
durables remains positive due to increasing
household purchasing power and a growing
middle class.

Japan
Malaysia
New ZealandPhillippines
Singapore
South Korea
TaiwanThailand
UAE
Vietnam
Excellent
The credit risk situation in the
sector is strong / businessperformance in the sector is strong
compared to its long-term trend.
Good
The credit risk situation in the
sector is benign / businessperformance in the sector
is above its long-term trend.
Fair
The credit risk situation in the
sector is average / businessperformance in the sector
is stable.
Poor
The credit risk in the sector
is relatively high / businessperformance in the sector
is below its long-term trend.
Bleak
The credit risk in the sector ispoor / business performancein the sector is weak compared
to its long-term trend.

August 2024

Consumer durables /retail outlook
EuropeConsumer durables gross output (sales)

2022

2023

2024*

2025*

France

3.6

1.2

0.9

0.4

Germany

1.4

-2.7

-0.7

2.7

Italy

7.5

-2.5

-2.9

2.6

Belgium

United Kingdom

-4.0

-2.2

-0.2

0.8

Czech RepublicYear-on-year, % change /*forecast – Source: Oxford Economics

Industry performance forecast
Austria

Denmark
FranceEuropean Union

Germany

Consumer durables sales growth toaccelerate in 2025

Sector performance remains subdued for thetime being

After a 2.9% contraction in 2023, consumer
durables sales in the region are forecast
to rebound modestly by 0.6% in 2024.
Predictions for a gradual recovery in the
sector this year are primarily based on areturn to growth in real incomes, driven
by both solid nominal income growth andeasing inflation.

After a 2.7% contraction in 2023, consumer
durables sales in Germany are expected
to decrease again this year, by 0.7%.
Despite robust wage growth, household
consumption recovery has not yetmaterialised. High interest rates and asoftening labour market, with graduallyrising unemployment, could trigger further
spending restraint in the coming months.

Still tighter monetary policies are holdingback higher consumer spending, andhousehold savings in the eurozone havestabilised above pre-pandemic levels. We
expect consumer durables growth in theEuropean Union to accelerate to 2.8% in
2025, given a more benign inflationary
environment and monetary easing.
Consumer electronics and furniture sales are
forecast to increase by 2.3% each, while thedomestic appliances segment should growby 5.5%.

FrancePolitical uncertainty impacts consumer
sentiment
We expect French consumer durables sales
growth to slow down in 2024 and 2025,
to 0.9% and 0.4% respectively. Consumers
are cautious about spending, although realhousehold income has started to rise andwage increases are outpacing inflation.
Household confidence has not improved
since the beginning of this year and is likely
to be further dented by the ongoing politicaluncertainty after the June/July legislativeelection. This has increased the risk that thesavings rate will stabilise at a higher level
than before the pandemic.

5

At the same time input costs for retailers
remain high and credit is expensive. The
credit risk of retailers has increased as aresult. At least consumer durables sales are
forecast to rebound by 2.7% next year.

United Kingdom
A modest growth outlook
After contractions in 2022 (-4%) and 2023(-2.2%), we expect consumer durables sales
in the UK to level off in 2024 and to grow by
only 0.8% in 2025. Although pay growth has
slowed, it has remained well above inflation,
supporting household spending.
However, retailers struggle with the lackof a comprehensive demand recovery andhigher costs. Smaller players suffer most ina shrinking market, as many are unable toaccess more favourable pricing and payment
terms.

Germany
Hungary
Ireland
Italy
Netherlands
PolandPortugal
Slovakia
Spain
SwedenSwitzerland
TurkeyUK
Excellent
The credit risk situation in the
sector is strong / businessperformance in the sector is strong
compared to its long-term trend.
Good
The credit risk situation in the
sector is benign / businessperformance in the sector
is above its long-term trend.
Fair
The credit risk situation in the
sector is average / businessperformance in the sector
is stable.
Poor
The credit risk in the sector
is relatively high / businessperformance in the sector
is below its long-term trend.
Bleak
The credit risk in the sector ispoor / business performancein the sector is weak compared
to its long-term trend.

August 2024

Atradius
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P.O. box 8982 · 1006 JD Amsterdam
The Netherlands
Phone: +31 (0)20 - 553 91 11
info@atradius.com
www.atradius.com

Copyright © Atradius N.V. 2024
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6

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