German consumer climate improves further : Findings of the GfK Consumer Climate study for Germany for May 2013

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gfkNuremberg, 24 May 2013 – The consumer mood in Germany continued to be very positive in May. Economic and income expectations improved slightly, while willingness to buy once again remained at an extremely high level on the whole. Following 6.2 points in May, the overall indicator is forecasting a value of 6.5 points for June.

Although the European Commission has predicted recession in the eurozone this year, there is still unwavering optimism among German consumers. Evidently, their attention is mainly concentrated on the good, stable general conditions in Germany. A high level of employment and good collective bargaining agreements coupled with falling inflation are all strengthening confidence. Consequently, both economic and income expectations increased slightly in May. In the wake of this development, the already high level of willingness to buy was also impressively maintained.

Furthermore, the positive development in the consumer climate was buoyed by the low propensity to save, which dropped to a new historic low in May. This is partly attributable to the decision of the European Central bank to reduce interest rates in the eurozone further in order to boost the economy.

Economic expectations: slight improvement

Following the moderate fall in the previous month, economic expectations improved again slightly in May, rising 1.3 points. The indicator is currently at -0.2 points and therefore remains around the long-term average of zero points.

This generally rather halting recovery is in line with current developments in Germany. According to the Federal Statistical Office, gross domestic product only registered a marginal year-on-year improvement of 0.1 percent in the first quarter of 2013. This indicates that recovery in the German economy will continue over the course of the year, but that it is likely to be relatively sluggish. Company investments are currently still particularly modest. Recession in many eurozone countries is also standing in the way of stronger development as it is affecting Germany’s key trading partners. Consequently, moderate growth in exports in this economic area is also to be expected.

Income expectations: slight rise

Following a slight rise in April, income expectations once again improved in May. The indicator value has increased by 3.1 points to its current level of 33.9 points. A higher value was last recorded in July 2012, when the indicator exceeded 36 points.

Evidently German consumers are currently focusing on the extremely positive domestic situation when assessing the outlook for their financial position. As a result of the continued stability of the labor market, an improvement in collective bargaining agreements in comparison with previous years for many employees and a falling rate of inflation, the majority of consumers are confident that they will have more disposable income in real terms. The recently negotiated pilot agreement for the metal and electronics industry in Bavaria corroborate that this conviction is not unfounded. This agreement means that employees in this key major industry will see an improvement of 3.4 percent in their wages and salaries from July 2013, and they will rise by a further 2.2 percent in May 2014. This agreement has so far been adopted by five other regions. Negotiations in other areas are in progress and it is almost certain that these will also be concluded successfully.

Willingness to buy: stable at high level

There has been virtually no change in willingness to buy in comparison with the previous month. The indicator registered a marginal increase of 0.1 points and is currently at 37.7 points. This is the highest value since March 2012, when the indicator was a little more than 38 points.

From consumers’ perspective, the conditions continue to be ideal for the very good buying sentiment to be sustained. In view of the high and stable level of employment, there is little fear of job losses. This ensures planning confidence, which is a particularly important prerequisite for making major purchases. The low interest rate is also boosting the appeal of taking out loans to pay for such purchases. It is currently still not viewed as particularly tempting to put money into savings.

Consumer climate: upward trend continues

Following 6.2 points in May, the overall indicator is forecasting a value of 6.5 points for June. The consumer climate is therefore continuing on its upward trend. Reality also seems to be reflecting this positive consumer mood. According to the Federal Statistical Office’s preliminary figures for the first quarter of 2013, the German economy only registered marginal growth of 0.1 percent on the last quarter of 2012. It appears that only private consumption provided positive momentum, with neither net exports nor investments contributing to this low level of growth. This confirms GfK’s hypothesis that private consumption has developed into a major pillar of economic growth.

Whether the consumer mood can remain on this good level ostensibly depends on the current extremely good situation in Germany being maintained. However, if the debt crisis escalates once again, the consumer climate is likely to hit hard times.

These findings are extracts from the “GfK Consumer Climate MAXX survey”, which is based on around 2,000 consumer interviews conducted each month on behalf of the European Commission. The report contains charts, forecasts and a detailed commentary regarding the indicators. In addition, the report includes information on proposed consumer spending in 20 different areas of the consumer goods and services markets. The GfK Consumer Climate survey has been conducted since 1980.

The next publication date is Wednesday, 26 June 2013

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