German Consumer Climate Cooling Slightly

According to the latest GfK* survey, the German Consumer Climate is cooling, not that it was recently especially warm. Based on consumers' appraisals of the outlooks for the economy and their personal situation and their willingness to spend in the current month, GfK forecasts the Consumer Climate in the month ahead. Currently, they are forecasting a decline in the Consumer Climate Indicator to 3.3% in January. This is the third decline in the indicator from the 4.2% reached in October, 2009. Since it began in January, 2002, the indicator has been within a fairly narrow range, from a high of 9.1% recorded in November and December of 2006 to a low of -3.5%, recorded in March, 2003.

The balance of opinion of German Consumers on Economic Expectations improved from -1.7% in November to 0.9% in December, but was still well below the 8.7% of October. The balance of opinion on Income Expectations more than doubled from 6.2% in November to 15.0% in December. However, the balance of opinion on the Consumption and Buying Propensity declined significantly from 26.3% in November to 21.1% in December and is now well below the recent peak of 36.5% in September. It appears that the decline in the balance of opinion on the Consumption and Buying Propensity is the major cause of the decline in the Consumer Climate.

The component parts of the Climate Indicator have shown much greater variation than the over all indicator. In contrast to the narrow range of the Consumer Climate indicator, cited above, the balance of opinion on Economic Expectations has ranged from a high of 69.5% in May, 2007 to a low of -32/9 in January, 2009. The balance of opinion for Income Expectations has ranged from 33.6% in May 2007 to -24.5% in November, 2002 and for Consumption and Buying Propensity, from a high of 64.4% in October 2006. to a low of -55.4% in November 2002. All four indicators are shown in the attached chart.*GfK Gesellschaft fur Konsumforschung (Company for Consumer Research)