Downward trend in German consumer climate has come to an end for now
Nuremberg, 24 October 2014 – The mood of German consumers improved again slightly in October. The downward trend in the consumer climate has therefore come to an end. Following a revised value of 8.4 points in October, the overall indicator is forecasting 8.5 points for November. Income expectations and willingness to buy have increased slightly, while almost no change was recorded in economic expectations.
In October, German consumers were evidently less affected by the continued problematic geopolitical situation and the resultant economic slowdown than they had been in the previous month. Following moderate declines in the previous month, both income expectations and the willingness-to-buy improved again, thereby confirming their already high level. The slump in economic expectations has ended and virtually no change was recorded in comparison with September.
Economic expectations: decline halted
After a dramatic collapse in economic expectations in the preceding two months, the indicator stabilized again in October. With a decline of 0.1 points on the prior month’s figure, the change was negligible. The indicator is currently at 4.3 points and therefore continues to be above the long-term average of zero points.
The economic outlook of German consumers therefore defied the trend in economic data, which was considerably weaker most recently. Across the board, economic institutions, and also the German government, had revised their growth predictions for Germany in recent weeks. In its latest forecast, the German government has predicted that the gross domestic product will only increase by 1.3 percent this year, while growth of 1.2 percent is expected for 2015. The figures for both had still been set at just under 2 percent back in spring.
The fall in optimism is above all attributed to the various international crises. The Russia-Ukraine conflict, the escalation of the situation in Syria and Iraq as well as the Ebola outbreak in Western Africa are all contributing towards uncertainty, with an ongoing negative impact on economic momentum.
Income expectations: increase again
Following two consecutive declines in income expectations, an improvement was recorded in October. After rising by 3.5 points, the indicator is currently at 46.9 points. It is therefore significantly above the previous year’s level and has maintained its excellent level.
As in the previous months, the exceedingly optimistic outlook is attributable to the stable situation on the German labor market, which is expected to be maintained for the time being. Despite the weakening economy, the unemployment figures should remain steady and it is even likely there will be an increase in employment to a new record value. In addition, the robust employment situation is responsible for an increase in earnings. In combination with an inflation rate well below 1 percent, this represents a real increase for Germans. It is anticipated that this positive development in income expectations will continue over the coming year.
Willingness-to-buy: boosted by optimistic income outlook
Willingness to buy also benefited from the rising income expectations in October. The income expectations indicator rose by 3.1 points and is currently at 45.6 points, which means it is again slightly above the corresponding value in the previous year.
The buying mood in Germany continues to be strong. The stable employment situation has reduced fears of job losses and is boosting planning security, which is important for making major purchases. The strong income situation of private households and the low interest level is also supporting the consumer mood.
Consumer climate: slight upward trend
Following a revised value of 8.4 points in October, the overall indicator is forecasting 8.5 points for November 2014. With this slight improvement, the downward trend in the consumer climate has therefore come to an end.
Consequently, the consumer climate has, for the time being, escaped the impact of the economic slowdown as a result of the various international crises. Private consumption can therefore continue to play its assigned role as a key pillar of the German economy.
However, if the situation in the crisis areas were to escalate, it is likely that the consumer climate will be affected. In particular, if the fight against Ebola is not successful and the disease spreads to Europe, this will strike a blow against the consumer climate.
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.
About GfK
GfK is the trusted source of relevant market and consumer information that enables its clients to make smarter decisions. More than 13,000 market research experts combine their passion with GfK’s long-standing data science experience. This allows GfK to deliver vital global insights matched with local market intelligence from more than 100 countries. By using innovative technologies and data sciences, GfK turns big data into smart data, enabling its clients to improve their competitive edge and enrich consumers’ experiences and choices.
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