Nuremberg, 21 December 2012 – As a result of the international economic headwind, German consumers are still feeling uncertain at the end of the year. This is verified by varied developments in the consumer mood in December. While income expectations increased slightly, both economic expectations and willingness to buy dropped. Following a revised value of 5.8 points for December 2012, the overall indicator is forecasting 5.6 points for January 2013.
German consumers continue to be unsettled. In December, it was above all the European debt crisis which caused the economic outlook to worsen slightly. Willingness to buy has not been unaffected by this and also fell a little, although it remains at a good level. Income expectations bucked this trend and, following a considerable decline in the previous month, saw a moderate increase in the last month of 2012. However, overall the consumer climate has fallen slightly, but it continues to be at a satisfactory level.
Economic expectations: slight fall
After three consecutive minor rises, economic expectations dropped slightly in December. The indicator fell by 3.3 points to its current level of -17.9 points, which means that the economic mood is 17 points below the prior year’s value as at the end of 2012.
Consumers are expecting the German economy to experience a difficult period in the coming months. A number of eurozone countries quite clearly slipped into recession recently, which is bad news for export-oriented companies, in particular. Accordingly, exports to this region have decreased quite noticeably of late. Until now, these losses could still be offset through better business with other economic areas such as Asia and the USA. At best, experts in general currently expect the gross domestic product to stagnate in the fourth quarter of 2012 and it is quite possible that it will even decrease slightly.
In its recently published forecast, the Deutsche Bundesbank predicts that the gross domestic product will only increase by 0.4 percent on average in 2013. Economists from the Bundesbank are therefore still slightly more pessimistic than the German Council of Economic Experts, which expects growth of 0.8 percent for 2013. However, according to the central bank, this is only a temporary slump so unemployment should not suffer any lasting damage. The ifo business climate index is also sending positive signals at the end of the year, rising for the second time in a row to its highest value since July 2012.
Income expectations: slight improvement
Following a sharp decline in the previous month, income expectations have once again increased as the year draws to a close. However, the rise of 3.4 points was not sufficient to fully offset the fall of more than 12 points in November. At present, the indicator stands at 21.2 points. It is therefore still considerably above its average of zero which was maintained over many years.
In light of the economic slump, German consumers are currently assuming that the rate at which their income increases will not be as high as it has been to date. However, the good indicator level suggests that Germans still expect income rises above the rate of inflation in the coming months. A prerequisite for this is that employment remains at its high level and inflation stays at a moderate two percent or lower.
Willingness to buy: second consecutive decline
Willingness to buy has also not managed to escape the effects of the economic slump. The indicator dropped in value for the second consecutive time. The fall of 9.3 points in December is significantly greater than the 4.5 point fall in the previous month. The indicator is currently at 20.1 points. A lower value was last recorded in May 2010, when it was at 18.1 points. Despite the decline, the current level can still be considered good.
The weaker economy has also caused German consumers to be a little more cautious about purchasing consumer durables or high-value products. It remains to be seen whether this trend will continue in the coming year. In addition to the rate of inflation, this will essentially depend on maintaining the high level of employment.
Consumer climate: slight downward trend
Following a revised value of 5.8 points for December, the overall indicator is forecasting 5.6 points for January 2013. The upward trend has therefore shifted downwards for the time being. Despite the moderate fall, the level of the consumer climate indicator continues to be satisfactory.
Alongside exports, stable development of consumption is an essential pillar of the German economy, especially in view of the current economic headwind, which is above all affecting the propensity of companies to make investments. An ongoing strong demand for goods and services from consumers helps prevent Germany slipping into recession. It is important that the labor market is stable and that a sustainable solution is found for the European debt crisis to reduce consumers’ uncertainty. If this is not successful, then consumption will also be facing a difficult year ahead.
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 EU 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.
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