German consumer confidence remained good in May
this year and GfK, the market research firm, said today that as in the previous
months, no clear trend was discernible. Following a value of 8.5 points in May,
the overall indicator is again forecasting 8.5 points for June. While economic
expectations increased considerably and willingness to buy registered a marginal
improvement, income expectations lost a large share of the gains achieved in the
The economic outlook of German consumers
continued to improve in May, despite the Ukraine crisis. This has also benefited
willingness to buy, albeit to a limited degree, with a slight increase recorded
in the indicator value. In contrast, the highest value since reunification
recorded for income expectations last month was not maintained and a large share
of the rise achieved in April was again lost.
Economic expectations: gaining momentum: After stagnation in
economic expectations for the last three months, there was a notable improvement
in May this year. The indicator increased significantly by 6.4 points, rising to
38.5 points. A higher value was last recorded in July 2011, when it climbed to
44.6 points. Overall, there is a slight upward trend in the economic mood.
GfK said that events in eastern Ukraine, which
reached a preliminary climax with the referendum on regional independence from
Ukraine, evidently did not have a lasting impact on the economic mood in Germany
recently. Reports of a continued increase in employment and a fall in the number
of registered unemployed below three million have presumably further
strengthened optimism with regard to ongoing economic development.
German federal statistics also testify to a robust start to 2014 for the German
economy. According to preliminary figures on the gross domestic product (GDP)
for the first quarter of this year, the economy has clearly gained momentum. GDP
rose by 0.8% on the last quarter of 2013, with the statistics office stating
that the positive stimulus was solely attributable to increased domestic
consumption and investment.
In contrast to consumers, companies evidently still consider there to be
potential for greater risks from the Ukraine crisis and this is reflected in the
decline of the Ifo Business Climate Index in May.
Income expectations: decline: The highest value in income
expectations since reunification reached in the previous month was not
maintained. The indicator fell by 4.5 points and the majority of April's
increase was therefore negated. However, at 47.8 points, the indicator remains
at a very high level and is still almost 14 points above the corresponding
previous year's value.
Despite the recent drop, Germans appear to be taking an exceedingly optimistic
view of the developments they can expect in their personal finances. Employment
continues to rise, as stated in the Federal Statistical Office report for the
first quarter, according to which 41.7 million were employed in Germany in the
first three months of the year. This marks an increase of 0.8% on the first
three months of 2013.
The stable labor market provides greater scope for salary and wage increases. It
can now be assumed with certainty that collectively negotiated incomes will
increase by around 3% this year. Inflation also looks set to remain moderate in
the coming months, which means Germans will notice a significant improvement in
their wallets in real terms.
Willingness to buy: slight increase: Following a drop in the
previous month, willingness to buy rose slightly in May. However, at 0.9 points,
the rise is minimal. The indicator is currently at 49.5 points and therefore
almost 12 points up year-on-year.
Consequently, the desire to consume has consolidated its already high level.
Stable employment prospects and the associated increases in income coupled with
extremely moderate inflation all contribute to establishing perfect general
conditions in Germany for high willingness to consume. The propensity to save
has also not had any effect in this regard as it is virtually unchanged on the
Consumer climate: stable development continues: Following a value of 8.5 points in May 2014, the overall indicator is again
forecasting 8.5 points for June. The consumer climate is therefore maintaining
its very stable development and has now been unchanged for four months.
This is also reflected in reality. The preliminary calculations from Destatis,
the federal statistics office for GDP in the first quarter of 2014 reveal that
the positive stimulus for growth solely came from within Germany, from private
spending, among other areas. This serves as confirmation of GfK's forecast
published at the start of the year, according to which private consumption will
increase by around 1.5% in real terms in 2014.
Although the Ukraine crisis does not yet appear to be having a negative impact
on the consumer mood, the international environment does still harbour risks for
the German economy. For example, the consumer climate would be affected if
energy prices increase significantly as a result of tougher economic sanctions
being imposed on Russia. This would then in all probability result in private
spending being cut, as households would be forced to allocate a greater
proportion of their budgets to natural gas or heating oil.
These findings are extracts from the “GfK Consumer Climate MAXX sur-vey”, 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