Uncertainty Continues for German Consumers

UK consumers' confidence may be rising, but German consumers do not share their optimism, according to GfK's latest consumer climate survey, carried out on behalf of the European Commission. With ongoing uncertainty surrounding tax, social security, healthcare and pension reforms, all consumer climate indicators were down in January.

The fall in the Index is the first in months - it had been rising slowly from May 2003. The latest dip in confidence contrasts with the ifo business climate index and the views of financial analysts ZEW, which remain positive. GfK suggests that the decision to bring forward major tax reform in mid-December has yet to boost confidence because its 'concrete financial effects will not show up on payslips until February or even March this year'.

The economic outlook indicator decreased by a further 4.2 points in January to stand at -5.8. However, the current indicator value, which is again way below the long-term average value of 0, still exceeds the corresponding value at the beginning of 2003 by 23.4 points.

Consumers' income expectations fell two points in December and a further 6 in January to -14.5 - although a year ago the score was -19.4 points. GfK suggests that the fear of potential financial burdens outweighs any possible benefits resulting from healthcare reform, and that pensioners, in particular, are worried about having to get by on less money at the beginning of the year - as of now, they are required to pay the full health insurance contribution.

The buying propensity indicator dropped by 9.5 points in January to -41.7 points, the lowest it has been since December 2002 - the gradual increase over the past year has been completely wiped out.

The overall consumer climate indicator is also down a fraction with a forecast of 5.0 for February 2004 following a revised forecast value of 5.3 points in January. GfK Marktforschung concludes that 'The potential economic recovery in Germany still gives cause for hope, however, that optimism in industry will influence consumer optimism. A decisive change for the better will depend on the unsettling discussions surrounding tax, pensions and healthcare insurance being resolved and a far-reaching improvement in the labour market situation'.

The GfK-Wirtschaftsdienst Konsum- und Sparklima (financial services, consumer and savings climate survey) is based on interviews with around 2000 people in the first half of each month.

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

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