- Findings of the GfK Consumer Climate study for Germany for September 2015 Consumer optimism has fallen somewhat in September as well. The consumer climate has declined. Following a value of 9.9 points in September 2015, the overall indicator is forecasting 9.6 points for October. The three individual indicators, economic and income expectations as well as willingness to buy, are declining.
- GfK Group
Apparently, the damper in consumer sentiment in August this year was not a fluke. The three indicators – willingness to buy, income expectations and economic expectations – also suffered losses this month. Economic expectations have declined the most. In light of the global economic risks, numerous flash points, and the recent sharp increase and largely uncontrolled influx of refugees, citizens apparently have increasing doubts regarding further economic development.
Economic concerns are increasing
The economic expectations of Germans continue to be on a downward trend. In September, the indicator dropped for the fourth time in a row. The decline of 10.2 points is significantly more pronounced than in August (-1.8 points). With a value of 6.4 points, the economic indicator is still slightly above last year’s level of 4.4 points.
The economic concerns of consumers have thus increased noticeably. This certainly has little to do with general domestic conditions, which remain very good in regard to employment, income and inflation. Rather, it is due to the fact that international conditions have recently become much more turbulent. Economically faltering emerging economies such as China, Brazil, or Russia are likely to continue to adversely affect the export prospects of German companies going forward.
In addition, the international flash points in the Middle East and the Ukraine, as well as the existing sanctions on Russia, apparently continue to demonstrate their effect. The sharp increase in the influx of refugees coming to Europe in recent weeks – particularly to Germany – can be added to this. If this influx continues in this order of magnitude, which must be expected at present, this is likely to have a negative impact on the population’s economic expectations. This is also demonstrated in the fact that the number of German citizens that expect rising unemployment in Germany has increased significantly in the last two months.
Income expectations in the wake of a declining economic outlook
For the second time in a row, Germans rate their income prospects as less optimistic than in the previous month. Reasons for this include the gloomy economic outlook on the one hand, and consumers’ expectations of rising unemployment in the coming months due to the large influx of refugees on the other hand. The income expectations indicator lost 5.8 points in September and now stands at 47.7 points. In August, the decline was 5.1 points. Nevertheless, the indicator is still at a very high level. It is also still 4.3 points higher than it was at this point last year.
Weaker economic outlook and fears of a slowdown in the labor market are also apparently beginning to have an effect on the income indicator. Despite excellent labor market figures and very good income growth with almost non-existent inflation, income prospects are now being affected by the international crises. Whether the downward trend will continue will likely depend on how policymakers deal with international crises in the coming weeks and months, primarily the influx of refugees to Germany.
Willingness to buy: fourth moderate decline in a row
Willingness to buy cannot escape the less favorable economic outlook. The indicator lost 1.6 points in September, falling to 50.4. The decline is very moderate. The level nevertheless remains very high. Although this is the fourth decline in a row, the indicator nevertheless represents an increase of 7.9 points compared to the corresponding period of the previous year.
In addition to declining economic and income expectations, the increase in willingness to save in this month is likely to be responsible for the moderate decline in the propensity to consume. Nevertheless, a level of more than 50 points shows that propensity to consume is still very pronounced. This is confirmed by the data on the development of the retail industry in this year, which accounts for approximately a third of total private consumption. According to initial preliminary figures from the Federal Statistical Office, real retail sales rose in July by 3.3 percent over the previous year. For the first seven months of this year, this results in a real increase of 2.6 percent.
Consumer climate declines
For October 2015, the overall indicator is forecasting 9.6 points, after 9.9 points in September. This is the second consecutive decline. Nevertheless, the indicator is at a very good level. In consideration of the extremely positive development of the retail sector, it can be assumed that the consumption will continue to be an important pillar of the economy this year overall.
The extent to which the strong influx of refugees will affect the domestic economy still remains to be seen. On the one hand, the number of consumers of goods and services is increasing, would have a positive impact on consumption. On the other hand, if the German citizens become anxious due to the large influx of refugees and fear for their jobs, whether justified or not, this would have a have a negative effect on consumption and thus balance out any gains.