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News : EU Economy Last Updated: Feb 26, 2014 - 9:23 AM


German consumer confidence stable in February
By Finfacts Team
Feb 26, 2014 - 9:21 AM

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There was no notable change in German consumer confidence in February in comparison with the previous month, according to GfK, a market research firm. Income expectations improved slightly, while both economic expectations and willingness to buy fell a little. Following a revised value of 8.3 points in February, the overall indicator is forecasting 8.5 points for March.

Overall, Germans remained optimistic in February. Income expectations once again improved on the very good value of the previous month. Despite slight declines, consumers continue to regard the German economy as being on a path to recovery. Willingness to buy almost remained at its already very high level and only dropped slightly. Propensity to save also did not register any significant change.

Economic expectations: trend positive despite decline: Consumers are still confident that the German economy has overcome its weak phase in the previous year and is entering a solid upswing. After five consecutive increases, economic expectations registered a moderate fall of 3.4 points in February. However, the overall trend of this indicator is still upward, albeit slightly weaker. It is currently at 31.9 points.

According to Germans, their economy is continuing to gain momentum. However, in order to establish a slightly broader basis for this upswing, making it more sustainable, it will be necessary to restart the investment engine, which has been sluggish until now. The prospects for this are positive. Interest rates are at a record low, the global economy is gaining momentum and domestic demand remains lively. This should stimulate the propensity of companies in Germany to invest.

GfK says that it is not just consumers who have this positive outlook, with both experts and the government also appearing more confident. In its recently published annual economic report, the German government raised its growth forecast for this year from 1.7% to 1.8%. Companies themselves are even more optimistic. In its business survey of more than 27,000 companies at the start of 2014, the Association of German Chambers of Commerce and Industry (Deutscher Industrie- und Handelskammertag, DIHK) came to the conclusion that the economy is on track and that employment prospects will slightly improve this year. Consequently, the DIHK raised its growth forecast of 1.7% from autumn 2013 to 2%. The Ifo Business Climate Index as reported on Monday, increased once again in February.

Income expectations: further rise: In contrast to economic expectations, income expectations once again improved in February. GfK says the income expectations indicator rose by 2.4 points and is currently at 48.6 points. It therefore in fact once again slightly improved on the 13-years high of the previous month.

In view of the economic recovery and the extremely stable development on the labor market, consumers are assuming that there will be a greater increase in their incomes again this year. This is not entirely unfounded. The chemicals industry has become the first to already conclude collective pay negotiations this year, agreeing an increase in pay of 3.7% over a term of 14 months.

This agreement is likely to act as a stimulus for other industries to also conclude new agreements this year. In addition, this collective wage agreement is also a sign that real increases in income should be expected over the next year.

Thee 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 European Commission. The GfK Consumer Climate survey has been conducted since 1980.

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