Findings of the German GfK consumer climate study for April 2010
The GfK consumer climate in Germany has shown a further improvement in spring 2010.
Both economic and income expectations have increased considerably, although the propensity to buy – as in the previous month – has recorded marginal losses.
The overall indicator is forecasting a value of 3.8 points in May this year, following a revised value of 3.4 points in April.
There are increasing signs of a recovery in the German economy, and consumers are becoming more aware of this, as their greater economic optimism shows.
Correspondingly, private households are assessing the development of their financial situation with increased confidence: the strong growth in income expectations this month demonstrates this clearly.
On the other hand, the propensity to buy is still showing the effects of the rise in fuel oil and petrol prices. This indicator is currently not benefiting from the improvement in economic and income expectations, and has recorded slight losses.
Economic expectations: growing confidence
Consumers are currently noticing a recovery trend in the German economy. Following a perceptible rise in economic expectations in the previous month, momentum has built even more in April.
The indicator has recorded an increase of 18 points and now stands at 22.5, which represents a gain of almost 54 points in a year-on-year comparison.
There has recently been a noticeable increase in signs that the German economy is experiencing a recovery. These suggest that the German economy has now moved past the crisis and is gradually working its way out of the deepest recession since the postwar period.
In the wake of the strong recovery in global trade, German exports have also gathered momentum and this is triggering a perceptible reduction in short-time working in the manufacturing industry.
This is one important reason for the increase in economic optimism, and forecasts for the labor market are consequently also being adjusted upwards. In the recently published spring report, leading research institutes anticipate that the average unemployment figure could even be slightly lower this year than in 2009.
According to the Institute for Economic Research (Ifo), companies are also taking a significantly more positive view of the future.
Income expectations: at highest level since 2001
Income expectations have also benefited from the improved economic expectations in April, with the indicator recording a significant climb of 21.7 points to 35.2 points. This represents the highest value for almost nine years: the last time the indicator exceeded this level was in May 2001.
The perceptible rise in economic optimism is currently driving the income expectations of German consumers. In particular, the forecast stability in the labor market and the consequent absence of a crisis-related dip in employment is resulting in a dampening of unemployment fears.
The government measures to stimulate purchasing power are also proving helpful in this respect, for example the increase in child allowance and the full tax deductability of health insurance contributions.
Propensity to buy: slight downward trend continues
The propensity to buy is currently not capitalizing on the marked improvement in economic and income expectations.
The indicator has recorded slight losses of 1.8 points and currently stands at 21.6 points. Even though there is currently a slight downward trend, the level can still be described as very satisfactory. This is further underlined in a year-on-year comparison, which shows an increase of 9.2 points.
The propensity to buy is currently being strongly affected by the considerable rise in energy prices of late: in particular, fuel oil and petrol prices have climbed noticeably over the past few weeks and months.
This has resulted in a renewed increase in consumers’ general price expectations. According to experience, this in turn has a negative impact on the propensity to buy and outweighs the positive stimulus provided by rising economic and income expectations in the eyes of consumers.
Consumer climate: lowest point passed
The overall indicator is forecasting a value of 3.8 points for May 2010, following a revised value of 3.4 points in April. The downward trend of the consumer climate in spring 2010 has therefore come to an end.
The next few months will show how sustained the change in mood will prove to be, but given the clear indications of economic recovery and the positive forecasts for the labor market this year, there are good signs that this recovery can continue, especially since the inflation rate is likely to remain moderate.
As forecast by GfK, these criteria will ensure that consumption remains stable this year, despite the crisis-related challenges. However, exports will remain the major source of support for economic growth.
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 GfK Group
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Nuremberg - 27 April 2010