More German Consumers Think Times Are Good For Making Major Purchases

The consumer climate in Germany, as measure by GfK* was unchanged in January at 5.5% but is forecast to increase to 5.7% in February. The consumer climate has improved slowly and haltingly from the low point in September and October of 2008 when the measure was 1.5%. It has only been since October 2010 that the indicator has risen above its long term average of 4.8 as can be seen in the first chart.

The latest survey shows no change in the appraisal of the German consumers on the general economic expectations. This is hardly surprising, since, at 58.5%, it has already risen some 91 percentage points from the -33 level of early 2009 .

Although the balance of opinion on their own income expectations fell from 40.3% in December to 37.7% in January, this figure, too, is high in the historical context. It is still larger that the pre recession peak of 33.6% in May 2007. The recent history of the balances of opinion on expectations can be see in the second chart.

Given the past improvement, the lackluster responses on the economic and income expectations in recent months have not been not surprising. The big surprise in the January data is the significant increase in the number of German consumers who think it is now a good time to make major purchases. The balance between those who think it is a good time and those who think it is a bad time increased 8 percentage points from 33.8% in December to 41.8% in January. This bodes well for the economy. It is this increase that underlies the forecast for February of a 0.2 percentage point increase in the overall consumer climate. The recent history of the balance of opinion on consumption and propensity to make major purchases is also shown in the second chart.

*GfK is one of the largest market research companies in the world. This survey was undertaken on behalf of the European Commission and was based on some 2000 interviews.