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Consumption: where is the momentum?



Consumption: where is the momentum?


Consumer sentiment is not picking up speed again towards the end of the year. Income prospects improved, economic expectations and the propensity to buy declined. GfK market research is forecasting a value of 4.3 points (December) for the consumer climate after a revised 4.8 points (November).

According to the consumer researchers, well-known economic risks such as a strong euro, the turbulence on the international financial markets and high food and energy prices are overshadowing the good general conditions in the German economy. According to the report, a “perceived inflation” is currently affecting German consumers. The positive facts that actually exist, the sustained improvement on the labor market and rising incomes, could apparently not prevent both the propensity to buy and the economic outlook from being assessed less optimistically. In contrast, income expectations stabilized with a small plus in November.

The economic expectations indicator lost 15 points in November and now stands at 24.1 points. It is still well above the average of the past few months. A year-on-year comparison shows an increase of almost 14 points. “The current level of the indicator indicates that consumers see the German economy on an expansion course, albeit with decreasing momentum,” interpret the researchers. Above all, the turbulence on the international financial markets, the strong euro and the growing number of voices that the economy in the USA could weaken more significantly than assumed made for the less optimistic assessment.

After the last five months of losses, analysts are observing improved earnings prospects for the first time since May this year. With a current value of 0 points, the income expectation is currently exactly at its long-term average and a good 6 points above the corresponding value from the previous year. Despite the stable development of income expectations, the propensity to buy fell again in November. After a minus of 8.9 points, the indicator now shows minus 21.8 points. The researchers last observed a similarly low value in the summer of 2005. Compared to the previous year, this results in a clear minus of a good 85 points.

Consumer observers sum up that above all the weakened propensity to buy has led to a decline in the consumer climate. After the revised 4.8 points in November, the indicator is forecasting 4.3 points for December. The consumer climate is therefore still positive. In any case, the recently published figures for gross domestic product in the third quarter gave us reason to believe that domestic demand will continue to increase somewhat by the end of the year.

The results are an excerpt from the “GfK Consumer Climate MAXX” study and are based on around 2,000 consumer interviews per month that GfK conducts on behalf of the EU Commission.

www.gfk.de

GfK consumer climate study for December 2007

GfK consumer climate study for November 2007

GfK consumer climate study for October 2007

GfK consumer climate study for September 2007

GfK consumer climate study for August 2007

GfK consumer climate study for July 2007

GfK consumer climate study for June 2007

GfK consumer climate study for May 2007

GfK consumer climate study for April 2007

GfK consumer climate study for March 2007

GfK consumer climate study for February 2007