Findings of the GfK Consumer Climate study for Germany for December 2014
Nuremberg, December 19, 2014 – The development of consumer sentiment in Germany has been very robust in December, with the consumer climate maintaining its upward trend. Following a value of 8.7 points in December, the overall indicator is forecasting 9.0 points for January 2015. Economic expectations and willingness to buy are improving, while income expectations have declined.
Evidently consumers currently assume that the phase of economic weakness in Germany will be temporary and are expecting their domestic economy to return to growth over the coming months. This is reflected in the considerable increase recorded in economic expectations this December. The willingness to consume has also once again risen slightly and therefore further improved on its already extremely high level. In contrast, income expectations have fallen. The propensity to save has plummeted to a record low. This has contributed to the further improvement in the consumer climate as the year draws to a close.
Economic expectations: end to downward trend
After a downward trend lasting five consecutive months, Germans’ economic expectations have risen quite markedly in December. The indicator has therefore not fallen below the long-term average of zero points. In fact, it has increased by 12.9 points to 14.5 points.
Despite this clear improvement, there continues to be some uncertainty among German consumers. The ongoing international crises in Iraq, Syria and Ukraine as well as the Ebola epidemic in West Africa are still having a weakening impact on the German economy. However, consumers are expecting the economy to recover relatively quickly and return to growth by spring.
This view has also been echoed in recently published growth forecasts. The Ifo Institute is now predicting GDP growth of 1.5 percent for 2015. Back in November, the German Council of Economic Experts had still been forecasting just 1 percent growth for next year.
German companies are also taking a more optimistic view of the future, as is reflected in the further increase in the Ifo Business Climate Index.
Income expectations: decline
Following two consecutive increases, income expectations fell in December. The indicator dropped by 7.5 points and now stands at 41.0 points. A lower value was last recorded exactly a year ago, in December 2013, when it declined to 39.5 points. However, the indicator is still at an extremely good level.
The decrease this month is most likely attributable to the ongoing, delicate international situation rather than the framework conditions in Germany. From the consumers’ standpoint, the latter continue to be extremely favorable. Month after month, employment is rising to new record highs. Incomes of both employed Germans and pensioners are developing positively, which is certainly also boosted by the very low rate of inflation of well below 1 percent.
Willingness to buy: further increase
In contrast to the income outlook, willingness to buy once again improved in December. After a third consecutive increase, the indicator is up 1.6 points to 49.1 points. It is therefore just under the 50-point mark, which it last exceeded in July 2014.
Propensity to consume is currently benefiting from the major collapse in energy prices. Heating oil and fuel have become considerably cheaper. As a result, private households have greater financial freedom for making other purchases. This is good news for retail, particularly in view of the Christmas trade.
In addition, the fact that propensity to save dropped to a record low in December has also boosted the spending mood.
Consumer climate: successful start to New Year
Following a value of 8.7 points in December, the overall indicator is forecasting 9.0 points for January 2015. The consumer climate is therefore in a strong position as it goes into the New Year and is an indication that economic development will be good in 2015. Accordingly, private consumption will continue to play a major role in the predicted upturn of the German economy in the coming year. However, any potential escalation of international crises may pose a threat to the consumer economy and therefore also for economic development in Germany as a whole.
About the study
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 consumer climate explicitly refers to all private consumer spending. However, depending on the definition, only 30 percent of private consumer spending is accounted for retail. The remainder is attributable to services, travel, rent, health services and the entire personal care segment.
GfK is predicting a rise in private consumption of 1.5 percent for 2014. Again, this does not relate to just retail sales, but to all consumer spending. Last year, GfK forecast that private spending would increase by 1.0 percent. According to figures from the Federal Statistical Office, private spending grew by 0.9 percent in 2013, which means GfK’s prediction was almost spot-on.
Willingness to buy is a mood indicator, as are all the other indicators. It examines whether consumers think it is advisable to make major purchases at present. Even if they answer “yes”, two further requirements need to be fulfilled for a purchase to be made: consumers must have the money that is required for such a major purchase and also regard this acquisition to be necessary. In addition, it only relates to consumer durables, which require a greater budget.
The findings of the consumer climate survey based on around 2,000 interviews conducted each month on a representative sample of the German population. This survey tool is subject to continuous quality controls, especially in relation to the representativeness. The fact that the results are used and recognized in the field of empirical legal research (for example, the likelihood of confusion between products) is a testament to the exceptionally high quality of this survey. This means that the results are quality approved by experts and must stand up in court.
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