Nuremberg, 27 March 2013 – The consumer mood in Germany does not display a uniform trend in March. While economic expectations improved slightly, there was a marginal decrease in income expectations and willingness to buy. Following 5.9 points in March, the overall indicator is also forecasting a value of 5.9 points for April.
The euro crisis hit the headlines again as a result of the political stalemate in the wake of the election in Italy. However, this is not having a long-term impact on the mood of German consumers. The economic outlook improved in March, which conveys a certain degree of equanimity among consumers on the economic development of Germany. In contrast, both income expectations and willingness to buy both fell slightly, but the indicator values are still at extremely high levels. This means that the upward trend in the consumer climate in general has come to an end. It remains to be seen what effect the escalation of the debt crisis in Cyprus will have on the mood of consumers. The intention that savers in Cyprus would have to make a mandatory contribution to help rescue the banks was only announced after the survey had been concluded.
Economic expectations: third consecutive rise
In March, economic expectations registered a third consecutive increase. The indicator rose by 3.1 points to 0.6 points at present. For the first time since June 2012, it has risen above zero, which is the long-term average of the economic mood.
The election result in Italy and the subsequent uncertain political future of the third largest economy in the eurozone has so far not caused the once again mounting economic optimism of Germans to falter. They clearly consider the German economy to be robust at present. The ongoing recession in the eurozone and the danger of a renewed eruption of the debt crisis have thus far not been dampening the economic mood. The third successive rise is also testament to consumers’ view that moderate economic recovery has now commenced, following a period of weakness in the second half of 2012. Companies are a little more restrained in their assessment, as the recent marginal decline in the Ifo Business Climate Index shows. Prior to this, it had risen four times in a row.
Income expectations: slight drop
In contrast to economic expectations, there was a drop in income expectations in March. However, this was a rather moderate -2.4 points and, at 29.4 points, the indicator is still at an extremely high level. The overall assessment of income expectations remains positive for the current year. The gain of almost 15 points in January has so far only been followed by an overall decrease of just under seven points in February and March.
Despite the slight decrease, consumers remain extremely optimistic about the future development of their financial situation. This confidence is not unfounded because initial salary agreements this year suggest that many employees can anticipate real increases in income. Workers in the steel industry in North West Germany will see a 3 percent increase in their wages in the current year. Salaries of public sector employees will be rising by a total of 5.6 percent over the next two years, of which 2.95 percent will be applied this year and 2.65 percent in 2014. Given the anticipated moderate rate of inflation of less than 2 percent, employees’ incomes will therefore rise by almost 1 percent in real terms.
Willingness to buy: virtually unchanged
There has been almost no change in willingness to buy. In March, the indicator only dropped by a minimal 0.8 points and is currently at 36.2 points. In general, Germans’ desire to shop is still at a very good level.
The stable employment situation, rising income and a low rate of inflation, which dropped to 1.5 percent in February, have all currently helped stabilize consumption at this pleasing level. Willingness to buy is boosted further by the reduced propensity to save in March. Consumers are still more likely to spend their money on major purchases rather than putting it in the bank at such a low rate of interest.
Consumer climate: no change
Following 5.9 points in March, the overall indicator is also forecasting a value of 5.9 points for April 2013. The consumer climate has therefore not been able to improve further at present.
It remains to be seen whether the stable development in the consumer climate will continue in the coming weeks. The fundamental framework data, such as the stable labor market, rising income and moderate prices all suggest that this will be the case. However, current events in Cyprus may damage consumer trust and become a burden on the consumer climate. The potential impact of the Cyprus crisis will only be clear from the April study, because the latest survey had already been completed when the situation on the Mediterranean island escalated. Despite this impending problem, GfK is confirming its forecast that private consumption will increase by 1 percent in real terms this year.
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 Tuesday 30 April 2013
Further information: Rolf Bürkl, tel. +49 911 395-3056, konsumklima@gfk.com
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