German consumers have become less optimistic this
August and following a revised value of 8.9 points in August, the overall
consumer confidence indicator is forecasting 8.6 points for September. When
compared with the previous month, both income expectations and willingness to
buy have fallen slightly, while economic expectations completely collapsed in
light of the intensified state of international affairs. The slump in sentiment
is the highest since at least 1980 when GfK the market research group began
The escalation of the situation in Iraq, Israel and Eastern Ukraine as well as
the gradually accelerating spiral of sanctions in Russia have now also had a
negative impact on the previously extremely optimistic economic outlook of
Germans. Uncertainty with regard to the continued economic developments in
Germany has increased quite considerably. In contrast, income expectations and
willingness to buy have so far remained relatively robust. While there has been
a decline in the wake of the drop in economic expectations, these indicators
have largely maintained their already high level.
Economic expectations: greatest slump since 1980: Gfk says
consumers are increasingly taking the intensified geopolitical situation into
consideration in their assessment of how the German economy will develop over
the coming months. The indicator dropped by 35.5 points, plummeting to 10.4
points. A decline of this magnitude in just one month has not been recorded
since the survey began in 1980. Consequently, virtually all improvement in the
economic expectations indicator over the past year has been negated in one fell
swoop. In August 2013, the indicator value was 1.8 points.
Consumers are expecting the economy to shift down a gear or two at least. Given
that no long-term solutions appear to be on the cards yet for any of the crises,
uncertainty is rising in the population on the potential consequences for the
German economy. In particular, the sanctions against Russia, which are already
significantly impacting exports, could become a real risk for the German
The first provisional figures from the Destatis, the federal statistics office
on GDP in the second quarter indicate that weakening exports and investments are
the primary cause of the decline of 0.2 percent in economic performance in
comparison with the previous quarter.
A further deterioration in the economy is also expected by German companies, as
is reflected in the latest Ifo Business Climate Index, which fell for the fourth
consecutive time, dropping to the lowest level since July 2013.
Income expectations: record value not maintained: The fact that
income expectations did not maintain the record level of the previous month is
primarily attributable to the collapse in the economic outlook. The indicator
dropped by a moderate 4.6 points and now stands at 50.1 points. It therefore
continues to be at an extremely high level.
Evidently the continued stability of domestic framework conditions, such as the
steady employment situation, good income development and low inflation, are
ensuring that the severely deteriorated economic optimism is only having a very
limited impact on the income outlook. Unemployment appears to be stabilizing
this year, at just under three million, and employment is even rising slightly.
In conjunction with a moderate rate of inflation, this is resulting in real
increases in income for both employees and recipients of statutory pensions.
Willingness to buy: maintaining extremely high level:
Willingness to buy continued to be highly robust in August. Although the
indicator fell by 1.7 points, the spending mood has remained at an extremely
high level. The indicator currently stands at 49.3 points and has therefore
still increased by almost 5 points in comparison with the corresponding period
of the previous year.
To date, GfK says the collapsing economic mood has not had much of an impact on
the propensity to consume. At present, consumers seem to be basing their
judgment on stable employment conditions as well as the low rates of inflation
and interest, rather than the ever more unstable international environment.
However, the marked increase in the propensity to save in August could be a
first indication that consumers will be more cautious in the coming months and
that the momentum for spending will subside somewhat.
These 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