German Consumer High Continues

The mood of consumers in Germany continues to brighten, according to GfK. The World Cup host nation has confidence in its new government, is planning major purchases and last considered the general economic outlook this rosy way back in early 2001.

Following a revised 5.8 points in May, the forecast for the overall indicator for June is 6.8 points. Last month's figures were already seen as very positive (see www.mrweb.com/drno/news5440.htm ) but May saw strong rises again in all three constituent indicators.

The propensity to buy indicator climbed to a record high in May, while personal income expectations have improved slightly due to a significant rise in western Germany outweighing a fall in the east.

Recent collective agreements concluded in the metal industry and electronic engineering sector are favourable from the point of view of employees and have been taken as a positive sign by consumers.

By contrast with consumers, the country's financial analysts (ZEW) and entrepreneurs (ifo) are more skeptical, with indicators slightly lower than in April although above the long-term average.

The index for general expectations of the economy climbed 8.7 points to 30.9 points, up fully 47 points since this time last year. Buoyant exports and (unlike last year) rising private consumption are fuelling the economic recovery.

The index for Germans' expectations of their own income rose by 5.7 points to 5.2 (the long-term average is zero) - also well up on a year previously (+18.5 points). This general rise masks a sharp split between east and west: in western Germany the indicator was up 13 to 17 points, in eastern Germany it fell more than 11 points to -24.

The propensity to buy indicator rose 15.3 points to 49.8 points, a record high and 71 points up versus a year ago. The VAT increase due at the beginning of 2007 continues to encourage the idea of spending now. In a separate study in April, 2,000 Germans were asked whether they were bringing forward any purchases due to the imminent increase - 13% said Yes, with almost 40% undecided. Home improvements, furniture, domestic appliances and consumer electronics top the list.

GfK notes the effect that the VAT rise is having on the last of these, and the dominant effect that is having on the overall indicator, and questions 'whether the start of 2007 will once again be marked by persistent reticence to buy, or whether private consumption will provide the necessary impetus for the German economy to continue its growth trend.' It suggests that 'only once the employment market has eased... will consumers be more confident about their financial future and this will in turn result in a basic positive consumer mood.'

GfK interviews around 2,000 consumers each month for its 'consumer climate MAXX' study, which is conducted on behalf of the EU Commission. The research group is online at www.gfk.com .

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.

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