Research institute says no WC economic impact for Germany

Economic research institute DIW said any economic boost for Germany from this year’s World Cup will be negligible.
 
DIW had in its latest weekly report, “Expectations with regard to the economic effects of the World Cup for Germany are high.
 
“Given that the (German) upturn has been so far driven largely by exports, there is an increasing number of voices arguing that this gigantic sporting event will have positive effects on domestic demand and that the economic recovery will therefore gain in depth and breadth.
 
“But that will only happen if the World Cup leads to a sharp change in consumption and investment behaviour. And that is not to be expected in this case.”
 
Football as an industry is very small compared with the auto and manufacturing sectors, DIW found.
 
“The football clubs of the Bundesliga premiere league have combined annual sales of around (EUR 1.2 billion), which includes not only ticket revenues, but also broadcasting rights, merchandising and advertising as well.”
 
That put football on the level of the German brown coal sector which, as DIW noted, “is a very tiny sector.”
 
Leading makers of sportswear and equipment, such as Nike, Adidas and Puma, which had 2005 annual sales of EUR 20 billion worldwide, had the bulk of their sales from lifestyle apparel that, while sporty in appearance, was not exclusively sports equipment.
 
In terms of the labour market, the championships could be expected to generate “a maximum 9,000 new jobs on a permanent basis.” Even with tens of thousands of temporary jobs in the catering industry during the month-long event, “no lasting effects can be expected on the unemployment rate.”
 
The positive effects from investment in the necessary infrastructure, such as the renovation of old stadiums or the construction of brand new ones, would also be limited since expenditure was staggered over a number of years and have already been completed prior to the start of championships.
 
DIW also questioned whether the World Cup would bring additional tourists into Germany.
 
“During the 1998 World Cup in France, the number of tourists was no larger than usual,” the report stated. “And a similar trend was observed in the European soccer championships in Portugal in 2004, as well as the 2004 Olympic games in Greece.”
 
Tourists who might otherwise have visited, stayed away to avoid the crowds of sport fans and because hotel beds were blocked en masse by event organisers, even if they were not eventually sold or needed.
DIW suggested that the sale of football-related goods and clothing might indeed be boosted, “but the decisive factor is whether private consumption as a whole increases.”
 
Consumption was expected to rise by 1.8 percent this year with an inflation rate of 1.4 percent. A pick-up in household spending in the second half of the year could be a result of the planned rise in value-added tax (VAT) from 2007 rather than the World Cup.