German Consumer climate – slight cooling at the turn of the year
Findings of the GfK consumer climate study for December 2009
Nuremberg, December 22, 2009 – The consumer climate in Germany will cool slightly at the beginning of the New Year. Although Germans’ economic expectations are stabilizing once more and income expectations are increasing perceptibly, the propensity to buy is recording losses. The overall indicator is forecasting a value of 3.3 points for January 2010, following a revised value of 3.6 points in December.
Since the labor market has proven to be very robust this autumn, consumers’ economic expectations have recovered a little and recorded a slight increase in December. Consequently, consumers’ income expectations are more than compensating for the losses recorded in the previous month. On the other hand, the expectation of rising prices in the energy sector is currently having a dampening effect on the propensity to buy. Furthermore, looming uncertainty as a result of worsening conditions on the labor market is leading to a perceptible increase in the propensity to save. This is also weighing on the consumer climate.
Economic expectations: stabilizing
Although economic expectations recorded a significant decline in the previous month, they have risen slightly again in December. The economic indicator is recording a slight increase of 0.8 points, and currently stands at 1.7, which is more than 34 points above the previous year’s level.
German consumers are assuming that the moderate recovery trend in the German economy will continue in the coming year. Their assessment is consistent with that of the research institutes and the German Council of Economic Experts, which are forecasting GDP growth of 1.5% to 1.7% in 2010. Experts are expecting a substantial recovery in global trade, which would particularly benefit Germany as an export country.
As a result of this recovery trend, the expected job losses in the coming year will be far less dramatic than was feared half a year ago. The renewed increase in the ifo Business Climate Index shows that German companies currently agree with this assessment.
Income expectations: significant improvement
Income expectations will have improved considerably at year-end 2009. With an increase of 8.8 points, the indicator has more than compensated for the previous month’s losses. It currently stands at 15 points and is therefore more than 30 points higher than in December 2008.
Consumers’ stable economic expectations are a particular source of support for income expectations. More positive economic prospects mean that the generally expected rise in unemployment is likely to be less severe than originally forecast. As a result, fewer households are affected by redundancy and potential income decreases. Another factor is also coming into play: surveys repeatedly show that one job loss results in three more employees feeling anxious about their own positions. If, as is generally forecast, considerably fewer jobs are lost, this in turn will mean that fewer employees need to fear for their positions. This is also likely to boost income sentiment.
Furthermore, Germans are evidently hoping that the government’s economic stimulus measures will have a positive effect on their income. For example, German families can look forward to an increase in child allowance from 2010 onwards. The current intensive price war in the retail sector is providing an additional boost to income sentiment, because lower prices have a strengthening effect on purchasing power.
Propensity to buy: slight dampening
In contrast to economic and income expectations, the propensity to buy recorded stable development in the previous month; however, it has dropped down in December. The decrease currently stands at 5.1 points. However, at 21.2 points, the indicator is still more than 27 points above the previous year’s level.
Despite rising income expectations, the propensity to buy is on the decline, which is predominantly attributable to the fact that consumers – despite the current price war in the retail sector – are expecting prices to rise again in future, particularly in the energy sector. The long-observed correlation between price stability and buying propensity is therefore prevailing, and is clearly overshadowing the positive effect of increased income expectations.
Another likely reason for the declining propensity to buy is the considerable rise in saving propensity in December. The threat of deteriorating conditions on the labor market is increasingly encouraging consumers to put money aside, which in turn is impacting negatively on the consumer climate.
Consumer climate: moderate losses
The overall indicator is forecasting a value of 3.3 points for January 2010, following a revised value of 3.6 points in December this year. This represents the third decline in a row. If this development continues in the coming months, the situation for private consumption will become more difficult in 2010 – as GfK has consistently indicated. With forecast growth of 0.5%, consumption was the major source of support for the economy during financial crisis-ridden 2009. GfK is currently expecting stagnation of real private consumption expenditure next year, which would mean that domestic demand would not provide any significant boost to macroeconomic growth.
In summary, the consumer climate has proven to be highly robust and resistant in the face of the serious financial crisis this year. We are currently not anticipating a slump in consumption in 2010, even though the year will also be a difficult one.
The survey
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 EU 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 will be January 25, 2010.
Further information: Rolf Bürkl, tel. + 49 911 395-3056, rolf.buerkl@gfk.com
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