Nuremberg, 25 September 2013 – Highs and lows for the consumer mood in Germany in September. While economic expectations and willingness to buy improved, income expectations dropped, albeit remaining at an extremely high level. Following a revised value of 7.0 points in September, the overall indicator is forecasting 7.1 points for October.
German consumers are expecting the economy to gain momentum again in the coming months. This is reflected in the increase in economic expectations, which are on a clear upward trend. Germans’ desire to shop also appears to be unbroken. In fact, willingness to buy once again improved on the record value of the previous month. However, income expectations declined for the second consecutive time, but continue to be at an extremely high level.
Economic outlook brightens further
Following the slight fall in the previous month, consumers’ economic outlook brightened again in September. The economic expectations indicator rose by 8.9 points and is currently at 10.7 points. The economic mood is therefore clearly on an upward course.
With this view, consumers are in agreement with experts’ current predictions. In its latest forecast, the German Institute for Economic Research (DIW; Deutsche Institut für Wirtschaftsforschung) predicted that the German economy will follow a moderate upward trend, which is expected to accelerate in the coming year. Following rather weak growth of 0.4 percent this year, gross domestic product (GDP) in Germany is expected to increase by 1.7 percent in 2014. However, in order for this to occur, a quite significant improvement in the currently rather weak investment activity of companies is a prerequisite. These expectations are not unfounded given the economic recovery worldwide, including the eurozone. According to the Ifo Business Climate Index, companies agree with this assessment. The indicator value once again increased slightly in September.
Income expectations: decline at high level
After the indicator value had already dropped in the previous month, income expectations once again fell in September. However, at 3.5 points, the decrease is slightly lower than in August, when the indicator fell by 5.6 points. At present, the income expectations indicator is at 33.7 points and is therefore still at an extremely high level.
The upward trend in income expectations that had been evident since the start of this year has been broken by this second consecutive decline. The fall in consumer optimism is potentially attributable to the considerable increases in food prices. Most recently, food prices were up around 5 percent year-on-year.
Evidently consumers’ fear that this price development will hamper their purchasing power is increasing. This has also dampened their income optimism. In addition, it cannot be ruled out that respondents were influenced by the German parliamentary election for the Bundestag, which had not yet taken place at the time of the survey. Some consumers are perhaps worried that further financial burden will be placed on them, for example, because of the eurozone crisis.
Willingness to buy: record value from previous month exceeded
In August, willingness to buy reached its highest level since December 2006 and it improved further still in September, increasing slightly by 0.6 points. The indicator is now at 45.0 points.
Despite the fall in income expectations, consumers are almost euphoric when it comes to their propensity to consume. Now is perceived as a good time to make major purchases. Historically low interest rates are boosting this trend. Following the decision of the US Federal Reserve central bank to maintain its expansive monetary policy in the coming months, it is to be assumed that the interest rate level in the eurozone will not increase significantly in the foreseeable future.
Saving money will therefore not be particularly appealing anytime soon either. Traditional investment options do not currently pay interest that exceeds the present rate of inflation. This means that the purchasing power of the majority of consumers’ savings deposits is constantly falling.
However, low interest is not the only reason for the current buying optimism. A stable labor market situation is ensuring that employees’ fear of job loss is minimal. This creates planning security, which is particularly important for private households to make major purchases.
Consumer climate: stable development
Following a revised value of 7.0 points in September, the overall indicator is forecasting 7.1 points for October.
Following a temporary breather, the consumer climate once again increased slightly in autumn. The likelihood that the moderate upward trend, which has been evident since the start of this year, will continue in the coming months has also increased further.
GfK confirms its forecast issued at the start of the year that private spending in Germany will increase by around one percent in real terms in 2013. The positive domestic economy is above all attributable to increasing employment levels, a stable number of unemployed and rising income for employees in real terms. Assuming that overall economic growth will only be just below 0.5 percent this year, private consumption will be an essential pillar for the economy.
The following table shows the development of the individual indicators in September in comparison with the previous month and prior year:
|
September 2013 |
August 2013 |
September 2012 |
|
| Economic expectations |
10.7 |
1.8 |
-17.2 |
| Income expectations |
33.7 |
37.2 |
23.9 |
| Willingness to buy |
45.0 |
44.4 |
33.0 |
| Consumer climate |
7.0 |
7.0 |
6.0 |
The following chart shows the development of the consumer climate indicator over the past few years:
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 table below provides an overview of the following indicators:
Economic expectations |
This index is based on the following question to consumers: “How do you think the general economic situation will develop in the next 12 months?” (improve – stagnate – deteriorate) |
| Income expectations | This index is based on the following question to consumers: “How do you think the financial situation of your household will develop in the next 12 months?” (improve – stagnate – deteriorate) |
| Consumption and buying willingness |
This index is based on the following question to consumers: “Do you think it is advisable to make major purchases at the moment?” (good time – neither good nor bad time – bad time) |
| Consumer climate | This index is used to describe private consumption. Key factors are income expectations, buying willingness and savings trends. The economic outlook has a more indirect effect on the consumer climate, generally as a result of income expectations. |
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