German Consumer Climate looking sunny

German Consumer Climate looking sunny

In September, the consumer climate in Germany has, by and large, seen positive developments. Both economic and income expectations are on the rise, whilst propensity to buy has taken a slight hit. GfK forecasts a further small increase in consumer climate of 0.1 points in comparison to the previous month, moving to 10.6 points.

It is not only the weather which has been sunny. Consumer climate had a sunny September, too. Despite political turbulence, economic and income optimism are on the up. Propensity to buy dropped slightly but remains at a very good level overall. Since propensity to save has not changed, consumer climate thus increased slightly.

Economic expectations continue upward trajectory

In September, economic expectations increased for the second consecutive report. The indicator rose by 4.9 points to 27.1 points. The dip for the six months or so leading into July therefore seems to be over and the indicator is, once again, on an upward trajectory. However, in comparison to the previous year, the indicator is still down by a good six points.

As before, neither the trade dispute between the EU and the USA nor the threat of a hard Brexit seem to be restricting economic optimism long-term. Consumers perceive Germany's growth to be stable even though the economic dynamism of recent years has dropped off somewhat. This has been evidenced in reality. According to data from the German Federal Office of Statistics (GDP) grew by 0.5 percent in the second quarter in comparison to same period of the previous year. Consistently positive messages from the labor market are also buoying the economic mood.

Income expectations show increase

In the wake of improving economic forecasts, income expectations also grew in September. Growth of 5.3 points more than makes up for the losses of the previous month. The current measurement is 57.9 points. That is the highest it has been for a year. The income indicator measured 61.4 points in August 2017.

This year, too, the persistence of an excellent labor market has provided good conditions for solid income growth for employees. This also significantly pulls up statutory pensions, which are linked to salaries and incomes. This means that, although inflation has increased recently, consumers can still expect noticeable income increases in real terms.

Propensity to buy suffers slight losses

Despite slight losses, Germans' desire to spend remains intact. The indicator fell by 2.3 points in September to 52.9 points, which is still very high. Compared to last year, the current figure represents a drop of a good four points.

Despite this small decrease, Germans remain in the mood to spend. The excellent position of the labor market provides employees with a high level of confidence in their job security. Job security, in turn, provides a certain level of surety with which to plan for larger purchases and expenses. People are also more willing to borrow to finance these larger purchases and expenses.

Consumer Climate: On the rise after two declines in a row

Following two consecutive drops, consumer climate is on the up once more. For October 2018, GfK forecasts a small increase in consumer climate of 0.1 points in comparison to the previous month, moving to 10.6 points. Private-sector spending will thus prove itself to be an important pillar of Germany's economic growth. This is significant, particularly in the light of the trade dispute between the EU and the USA. Exports could be hit by higher tariffs or restrictions, which will primarily impact Germany, as an exporting nation. If this happens, it will be all the more important for the domestic economy to act as a sturdy and reliable anchor. This is why GfK is confirming its prognosis that real private consumer spending will rise by around 1.5 percent this year.

Provisional publication dates for 2018

  • Friday, October 26, 2018, 08:00 am
  • Wednesday, November 28, 2018, 08:00 am
  • Friday, December 21, 2018, 08:00 am

Source of information

Continental AG & Profibusiness.world

Date

October 03, 2018

Translator

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