Findings of the GfK consumer climate survey for April 2007
Nuremberg, April 26, 2007 – With the ending of the anticipated weak phase, the consumer climate made a significant recovery in the first quarter of 2007. Consumer expectations in terms of the economy reached an all-time record level this April, with income expectations and the propensity to buy also on an upward trend. As a result, the consumer climate indicator is forecasting 5.5 points for May this year, which is up on the original April forecast of 4.4.
Consumers are becoming increasingly aware of the clear signs of a strong economic upswing. The overall good situation on the job market and further marked increases in wage and salary levels mean that in addition to the generally positive economic outlook, income expectations are also rising sharply. After the weak phase in the first quarter, these positive facts are now also likely to encourage the propensity to buy.
Economic expectations: at record level
Germans are currently experiencing a state of boundless economic euphoria. In April, the indicator again rose by just under 8 points to reach 61 points. This represents the absolute peak value since monthly consumer climate surveys first began in 1980.
A major factor associated with the economic optimism is the generally positive development of the job market. The fall in unemployment levels is even more rapid than originally anticipated in August last year. Particularly pleasing is the fact that the rising numbers in paid employment are mainly in jobs where they are liable to pay social contributions. The very good economic development is also reflected in the burgeoning tax revenues. In the light of this trend, even the experts are upgrading their growth forecasts for this year. In their recently published economic reports, the leading economic research institutes have consequently raised their growth forecasts for this year to 2.4%, which is a marked increase from last autumn, when the forecast was just 1.4%.
A glance at the economic mood indicator for lifestyle universes shows that sentiment was up in every social group, except for the upper classes. However, in the latter case it should be recalled that this group already recorded marked increases in previous months and remains at a generally high level.
Income expectations: sustained upward trend
In the wake of the excellent economic outlook, income expectations have also risen steeply, with the indicator rocketing up by just under 14 points. This is the fourth rise in succession. The indicator for income expectations currently stands at 29.6 points, a value surpassed only once previously, in April 2001, which is precisely six years ago.
The improvement in the job market has also given consumers grounds for thinking that the extremely modest wage and salary rises of recent years are now a thing of the past and that this year is likely to bring a marked rise in earnings again. This belief is born out by the tariff agreements concluded this spring. Employees can consequently assume that there will be "more money in their pockets" in real terms. This offsets the additional financial burden this year attributable to such measures as the rise in the rate of VAT, the cessation of the commuter allowance or the abolition of the savers’ tax free allowance.
In terms of lifestyle universes, it is apparent that the working class group is markedly more pessimistic in its assessment of the income expectations for April. This group includes those drawing HARTZIV unemployment benefit and housing benefit, who derive no direct benefit from the higher earnings resulting from the economic.
Propensity to buy: weak phase ends
Buoyed up by the positive economic climate and income expectations, the propensity to buy has also risen for the second time in succession. The indicator recovered by 6 points in April to settle at its current value of –6.5 points.
Evidently, the subject of the VAT increase is not high on the list of consumer considerations, since the effects of the rise on the rate of inflation have been far below many of the original predictions. As a result, the overall positive sentiment with regard to the economy and income are likely to regain the upper hand during the course of the year, which will presumably lead to further recovery of the propensity to buy. This testifies increasingly to the fact that the anticipated weak phase forecast by Gfk has remained a phenomenon confined to the first quarter of 2007, and that this was due in the first instance to the special effect triggered by the VAT increase.
Consumer climate: marked upswing
With the declining trend in the consumer climate ending with the close of the first quarter, the positive tendency is now continuing. The indicator is forecasting 5.5 points for May, which is up on the April forecast of 4.4. The rise can be accounted for mainly by the steep upward trend in income expectations. The prospects of the positive trend continuing into the following months look good. However, this is contingent on consumer confidence in the reliability and stability of the coming reforms in political terms and that there is no additional financial burden on consumers. Also to be avoided are any major disruptions caused by energy prices. If crude oil prices rise drastically, for example, as a result of further escalation in the political tensions in the Gulf, this would certainly have a dampening effect on the consumer climate.
These findings are extracts from the comprehensive "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 info rmation 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 May 25, 2007.
For more information, contact: Rolf Bürkl, GfK Marktforschung,
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