Nuremberg, 23 April 2014 – The economy in the European Union (EU) states is beginning to grow again. Consumers are hoping that the economic crisis will at last be over this year. The Consumer Climate index for the EU clearly reflects this trend and gained a total of 0.8 points in the first quarter of 2014. It currently stands at 8.4 points. These are the results of the GfK Consumer Climate Europe in 14 European states.
Economic recovery in the EU is picking up momentum again. According to Eurostat, a negligible increase of just 0.1 percent was recorded for the whle of last year. However, for this year, experts anticipate an increase in GDP of 1.3 percent in the 28 EU states. This is no doubt also a reflection of an improvement in global economic conditions. GDP in most of the EU countries covered grew both against the previous quarter and against the previous year. Only crisis-hit countries Greece and Italy reported a further shrinking in GDP against the previous quarter at the end of 2013. In Italy, the economy picked up again slightly in the fourth quarter with 0.1 per cent growth against the previous year.
However, the green shoots of recovery are still very fragile and many uncertainties still have to be overcome. France and Italy want to move away from systematic austerity measures and start to take on more debt again in order to help the economy get back into gear through more investment. It remains to be seen what impact this will have on their credit rating in the financial markets and on the European fiscal compact. Another risk is low inflation. Many experts already fear a period of deflation in the eurozone – in other words a decline in prices, as was already the case in Spain this March.
The optimism which is now taking hold among many European consumers is therefore entirely justified. In almost all the countries represented here, economic and income expectation, as well as willingness to buy indicators are pointing upwards. In many countries, they have reached levels not seen for years. The Consumer Climate index for the EU (28 countries) is also rising. In March, it stood at 8.4 points, an increase of 0.8 points in the first quarter of this year and the highest figure since April 2008. Exactly a year ago, it stood at just -3.3 points.
Germany: indicator increases further from high level
All three indicators for Germany are at a very high level. Even so, they have seen another further sharp rise since December 2013. In March, the economic expectation indicator stood at 33.2 points, an increase of just under ten points against December 2013. If we look at the indicator’s performance over the last 12 months, it has in fact risen by almost 33 points. In January of this year, the indicator reached its highest level since July 2011 (44.6 points) at 35.5 points.
Income expectations currently stand at 45.6 points, an increase of around 6 points since the end of last year. One year ago, the indicator stood at just 29.4 points. It reached an interim high of 48.6 points in February 2014. Its peak was in January 2001 (49.4 points).
The picture is similar for the willingness to buy. In March, the indicator for Germany was at a very high level of 55.5 points, which means an increase of 9.4 points since December. The last time the figure was higher was before the increase in VAT in December 2006 at 59.9 points.
France: recovery at a low level
In spite of the difficult political situation in France, all three indicators rose in the last quarter. However, economic and income expectations along with the willingness to buy are still in negative territory. Economic expectations have risen by 6.5 points since December and now stand at -10.8 points. If we look at the performance of the last 12 months, the index has increased by almost 31 points. Back then, the indicator stood at -41.6 points.
Income expectations have risen by 7.4 points since December and are currently at -32.6 points, the highest figure since July 2012. Even though the level is still extremely low, there is a clear recovery in relation to March 2013. Back then, the indicator stood at -57.9 points.
The willingness to buy is also higher than in December at -27.3 points, the best figure since June 2012. However, compared with last year, the increase is smaller than in the case of the two other indicators. At the same time last year, willingness to buy was at -36.2 points.
United Kingdom: economic expectations at their highest level in over 16 years
Economic expectations in the UK are at their most optimistic for many years. The indicator has risen by a further 8.6 points since the end of last year and is now at 31.5 points. This is the highest level since October 1997. Back then, the indicator was at 36.7 points. The indicator has increased by 53.3 points since March 2013.
Income expectations among consumers are also increasing in line with good economic expectations. The indicator currently stands at 10.3 points, an increase of 16.6 points against December 2013; it has even risen by as much as 28.6 points in relation to 12 months ago.
Although willingness to buy is still in negative territory, there are signs of a further recovery here as well. The indicator stood at -10.9 points in March 2014. This means an increase of 16.6 points since December and of 24.7 points in relation to last March. It is therefore at its highest level since October 2007.
Italy: sharp rise in economic expectations year-on-year
Although all three indicators are still in negative territory in the case of Italy, there seems to be a fundamental turnaround. Economic expectations have risen by 17 points to -21.4 points since last December, which is the highest level since August 2010. However, the indicator has climbed by just a shade under 14 points against March 2013.
There are also signs of a slight improvement in income expectations. The indicator currently stands at -13.7 points. This is just under 20 points more than in December. In January, the indicator was in fact at its highest level in precisely four years at -9.7 points. In relation to March 2013, the figure has risen by over 37 points. Back then, it was -51 points.
Willingness to buy is at -15.3 points. In February, the indicator was in fact at its highest level since July 2011 at -12.2 points. The indicator has therefore risen by six points in the first quarter of 2014, and by over 29 points since March 2013.
Spain: economic expectations at their highest level in just under 14 years
Hopes of an economic upturn are taking hold even among Spain’s crisis-hit consumers. Economic expectations currently stand at 23 points, an increase of 16 points against the end of last year and the highest level since June 2000. The indicator has risen by 55 points since March 2013.
Income expectations are currently back in positive territory for the first time since December 2006 at 0.9 points. The indicator has therefore increased by over 11 points since December and by more than 33 points since March 2013.
Willingness to buy has also improved since December, namely by 4.2 points to -10.2 points. If we look at the figure from February when the indicator dipped back to -20.7 points, the increase is notable. A higher figure for willingness to buy was last recorded in February 2011.
Greece: sentiment stabilizing
Consumer confidence in Greece is stabilizing at a very low level. Economic expectations currently stand at -24.6 points. This means an increase of just under 7 points since the end of last year and of over 12 points since March 2013. The indicator is therefore at its highest level in precisely three years.
There was also a further rise in income expectations in March to -29.3 at present, the highest level since February 2010. However, in February, there was a fresh slide in the indicator to -38.1 points. In December, the figure was at -33.1 points.
However, Greeks are still far from wanting to make any larger purchases. The relevant indicator stands at -26.1 points. This means an increase of just under 5 points in relation to the end of last year. In March 2013, the indicator was just a little lower at -30.3 points.
The findings of the GfK Consumer Climate Europe are taken from a consumer survey carried out in countries of the European Union on behalf of the European Commission. Approximately 40,000 individuals, representing the adult population in the EU, are surveyed on a monthly basis in 27 countries.
The GfK indicators of the Consumer Climate Europe are based on monthly surveys focusing on consumer sentiment. They deal with the general economic situation in the different countries and the situation of individual households.
The questions on the GfK Consumer Climate Europe are asked on a monthly basis, primarily in an omnibus survey. This is a survey dealing with several issues, conducted either by telephone or in a face-to-face interview.
From the monthly range of 12 questions overall, five questions that play a decisive role for the consumer climate are selected for the GfK Consumer Climate Europe.
The selected five indicators – economic expectations, price expectations, income expectations, willingness to buy and propensity to save – are calculated as follows:
“Net totals” are used as a basis for calculating the indicators. The share of consumers who gave a positive response (e.g. the financial situation of the household will improve (considerably)) is subtracted from the share of those who gave a negative response (e.g. the financial situation of the household will worsen (considerably)).
In a further step, this net total is standardized using established statistical methods and then converted so that the long-term average of the indicator is 0 points and there is a theoretical value range of +100 to -100 points. However, on an empirical basis, values between +60 and -60 points have generally been realistic since 1980.
If an indicator is positive, this shows that consumers’ assessment of this variable is above average in a long-term comparison, and vice versa for negative values. Standardization makes it easier to compare the indicators of different countries, as variations in response behavior resulting from different mentalities are offset, while the fundamental trend of the indicator remains unchanged.
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