Falling economic optimism curbs German consumer climate: Findings of the GfK Consumer Climate study for Germany for September 2014

gfkNuremberg, 26 September 2014 – The mood of German consumers worsened for the second consecutive month in September. The consumer climate once again suffered a setback. Following a value of 8.6 points in September, the overall indicator is forecasting 8.3 points for October. Economic and income expectations as well as willingness to buy all declined at virtually the same rate.

The continued tension with regard to the geopolitical situation, which consumers now see as also posing a threat to developments in Germany, has caused optimism to dwindle further in September. The decreases in Economic and income expectations as well as willingness to buy were at a similar level. All indicators have fallen between six and seven points.

Economic expectations: considerable slowdown in decline

Following the major slump in August, the economic outlook in Germany once again worsened in September. However, at six points, the drop is significantly lower than in the previous month, when the indicator plummeted by more than 35 points. The indicator currently stands at 4.4 points and is therefore still above the long-term average of zero. A lower value for economic expectations was last recorded in July 2013, when it was 4.3 points.

According to consumers, the ongoing tense geopolitical situation and economic weakness in a number of eurozone countries are likely to have a greater impact on the German economy in future. The first signs of a slowdown are becoming evident in economic development. In the second quarter, economic performance fell by 0.2 percent in comparison with the same period of the previous year. Stagnation or, in the best case, a slight improvement is expected for gross domestic product in the third quarter of the year.

Companies are also evidently no longer confident that there will be strong growth in the second half of the year. The Ifo Business Climate Index dropped to its lowest level in almost 18 months.

Income expectations: second consecutive decline

In the wake of falling economic expectations, consumers’ income expectations also fell for the second month in a row in September. Following a fall of 6.7 points, the indicator currently stands at 43.4 points. It is therefore still significantly above the comparable figure in the previous year and clearly above-average.

Although the current weak economic situation has had a slight negative impact on the income expectations indicator, the continued high level is a reflection on the good general conditions in Germany. The labor market is stable and real income is rising as a result of low inflation. These are decisive pillars for income prospects. According to predictions, these framework conditions will remain in place over the coming year.

Willingness to buy: affected by income expectations

The declining economic and income expectations have had a widespread impact and have evidently also affected willingness to buy. The indicator dropped by 6.8 points in September and is at 42.5 points at present. However, in comparison with the same period of the previous year this represents a slight decrease.

Despite the decline, consumers still appear to be in a buying mood. The real income situation of many households recently improved noticeably. In conjunction with a low rate of interest, consumers are more inclined to spend rather than save money.

Consumer climate: slight drop

Following a value of 8.6 points in September, the overall indicator is forecasting 8.3 points for October. This is the second consecutive decline for the indicator, but it continues to be at a good level.

It is above all the various international crises which are behind a slowdown in the consumer climate at present and the first signs of uncertainty are beginning to show among German consumers.

Should the crises escalate further, a deterioration in the general conditions in Germany, which have so far remained excellent, cannot be ruled out. In this case, there is a danger that private consumption would no longer fulfill its role as a key pillar of the German economy. 

About the study

These findings are extracts from the “GfK Consumer Climate MAXX sur-vey”, 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 wellness 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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