German Consumers expect incomes to rise: Findings of the GfK Consumer Climate study for Germany for July 2014

gfkNuremberg, 25 July 2014 – The mood of consumers in Germany is exceedingly robust in July this year. The consumer climate not only remained at an extremely good level, but even improved slightly. Following a value of 8.9 points in July, the overall indicator is forecasting 9.0 points for August. Income expectations reached their highest value since reunification, while economic expectations almost maintained the record figure of the previous month. In contrast, willingness to buy dropped slightly from its very high level.

Despite the escalation in the situations in Israel and Ukraine, German consumers continue to be exceedingly optimistic this summer. The downing of Malaysia Airlines flight MH17 in eastern Ukraine has not yet impacted the consumer sentiment as the survey had already been almost completed by that point. The increase in income expectations to the highest value since reunification is particularly noteworthy. However, the remaining indicators have only changed slightly this month. Germany’s World Cup win in Brazil has evidently also not had any effect on the indicators. This appears to confirm the presumption voiced prior to the event that the consumer mood would not be greatly influenced by the euphoria after winning the World Cup, as it is already at an exceptionally high level.

Economic expectations: virtually unchanged

The economic outlook of Germans appeared to be good shape in July. At 45.9 points, the indicator only fell by 0.3 points this month and therefore almost maintained the three-year high achieved in the previous month.

Consequently, economic expectations remain on an upward trend. However, the great momentum that was still evident back in June has slowed a little, at least in the short term. This is currently also apparent in other indicators, such as industrial production and the order situation in the construction industry, which appears to have eased off at present, after a very strong first quarter of 2014. This is above being attributed to the current geopolitical situation. The crises in the Middle East and eastern Ukraine are clearly all dampening the economic mood. Despite this, the majority of experts, including the German Bundesbank (central bank), are not anticipating an end to the upswing and simply regard this as a brief pause.

Income expectations: increase to new highest value since reunification

If the economic mood is currently a little more restrained, the signals for income prospects make for particularly good reading. In July, the indicator was up by a notable 7.5 points, rising to 54.7 points. This is the highest value that has been recorded since the survey on the climate in a reunified Germany began in 1991.

While the international situation is clearly playing an important role in the assessment of the economic prospects, for the income expectations indicator there is a greater focus on the framework conditions in Germany itself. These continue to be extremely good. Unemployment is relatively low and employment levels are continuing to rise, albeit at a slower rate than last year. The stable labor market situation is the basis for noticeable income rises, which would manifest themselves in real increases on account of the low level of inflation. In the wake of good salary developments, Germans who collect pensions can also expect real improvement this year. After many years of freezes or even drops in real income, this is a very positive outlook for pensioners.

Willingness to buy: marginal decline at high level

In July, the increase in willingness to buy of the previous month was partially negated. The indicator dropped by 2.2 points and now stands at 51 points. The spending mood of Germans therefore remains strong and the exceedingly high level has been consolidated.

One reason for the marginal decline is that the impact of the renewed key interest rate reduction by the European Central Bank last month has abated. This had caused propensity to save to plummet in June and consequently boosted the willingness to spend. This stimulus is currently lacking, as a result of which there was no change this month. The stable labor market, income increases and moderate inflation therefore continue to be the key pillars of willingness to buy.

Consumer climate: stable development

Following a value of 8.9 points in July, the overall indicator is forecasting 9.0 points for August. This is the highest value recorded since December 2006, when the indicator was at 9.1 points. After slightly stronger growth in July, the consumer climate for August is on the whole indicating stable development.
Given the latest developments in the consumer climate, GfK is upholding its prediction from the start of the year, according to which real private consumption would increase by 1.5 percent this year. The domestic economy, especially private spending, is on track and will be a key pillar of economic development in Germany this year.

However, a variety of risks from abroad for the spending situation still persist, and have in fact even intensified to some degree recently. In addition to the escalation of the situation in Israel and Gaza, it cannot yet be ruled out that the downing of the Malaysia Airlines passenger plane over eastern Ukraine will not have a significant negative impact on the mood. This was not reflected in the latest survey in July as this had almost been completed at the time of the crash.

About the survey

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 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.

For more information, please visit or follow GfK on Twitter: