Findings of the GfK Consumer Climate study for Germany for February 2015
Nuremberg, February 26, 2015 – German consumers are increasingly optimistic. The consumer climate has improved considerably. Following a value of 9.3 points in February 2015, the overall indicator is forecasting 9.7 points for March. Economic and income expectations as well as willingness to buy have all increased further.
At present, German consumers are seemingly not be greatly affected by the recent escalation of the situation in eastern Ukraine, the ongoing tensions between Russia and the West as well as events in Greece. Instead, their optimism continues to grow, as is reflected in the stable upward trend in economic expectations. The collapse in energy prices is boosting the purchasing power of private households and giving them some freedom to make other purchases. Accordingly, there were increases in both income expectations and willingness to buy. After falling further in February to reach a record low, propensity to save continues to be a key pillar of the consumer climate.
Economic expectations: clear upward trend
Germans feel the domestic economy is on a stable upward trend. In February, economic expectations recorded a significant increase for the third consecutive month. The indicator rose by 4.7 points and is currently at 27.2 points.
Despite the ongoing crisis in eastern Ukraine and uncertainty as to whether Greece will remain in the eurozone, Germans remain confident that their economy is clearly on course for growth. Economic experts share this view. Rather restrained forecasts for 2015 were recently revised upward. The majority of experts now predict that gross domestic product (GDP) will improve by 1.5 percent this year.
Low inflation and a weak euro in the wake of the ECB’s expansionary monetary policy are generating the necessary momentum. The weakness of the euro is stimulating German exports in areas outside the eurozone. In addition, energy cost-savings will boost both the intention of companies to invest and the propensity of Germans to consume. The fourth consecutive increase in the Ifo Business Climate Index in February supports this assumption, although it only improved slightly this month.
Income expectations: further improvement at high level
In February, the already extremely positive income outlook of consumers improved once again. Following a considerable increase in the previous month, the indicator rose by a further 2.8 points to exceed the 50-point mark. It is currently at 50.6 points.
The significant drop in fuel and heating oil prices compared with the prior year even pushed inflation in Germany below zero to -0.4 percent in January. Combined with the extremely stable labor market situation, this is resulting in substantial improvements in real income for both employees and pensioners.
Willingness to buy: tops previous month’s record value
Germans’ willingness to buy improved for the fifth time in succession in February this year. The indicator rose by 1.7 points to 59.1 points. It therefore topped the eight-year peak of the previous month. A higher value of 59.9 points was last recorded in December 2006, directly before the increase in VAT.
Willingness to buy is currently benefiting from the same influences as income expectations: exceedingly low interest rates and the severe drop in energy prices. The money households are saving on energy is available for other purposes. Given that saving is currently not a particularly appealing alternative, Germans are moved to splash out on major purchases instead. This is confirmed by the trend in the propensity to save, which dropped to a record low in February.
Consumer climate: upward trend continues
Following a value of 9.3 points in February 2015, the overall indicator is forecasting 9.7 points for March. This is its highest value since October 2001, when the indicator was at 11.0 points. The consumer climate therefore remains on the upswing in Germany. Private consumer spending will once again play a key role in economic development this year. Consequently, in its recently published forecast, GfK predicted real growth in total private consumption in Germany of 1.5 percent for 2015, which is virtually on a par with overall GDP growth.
However, potential risks for the consumer economy must be taken into account. Besides the situation in eastern Ukraine, recent events in Greece cannot be overlooked. If developments in these areas cause uncertainty among German consumers, this will also have a severe impact on the consumer mood and therefore also consumption.
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 2015. Again, this does not relate to just retail sales, but to all consumer spending. Last year, GfK also forecast that private spending would increase by 1.5 percent. According to figures from the Federal Statistical Office, private spending grew by 1.2 percent in 2014.
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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