Germany: Consumer climate at three-year high

German consumers currently expect the economic upturn to continue in the coming months. This is demonstrated by the sharp rise in economic expectations over the last three months. In this context, the public clearly sees a realistic prospect of income growth, which is itself helping to stimulate the propensity to buy.

Economic expectations: significant improvement

In September, the indicator again saw a substantial increase of 6.9 points. This means that it has risen by almost 50 points over the last three months to 53.5 points, the highest level for around three years.

German citizens also believe that the domestic economy will remain on track for recovery. Although economic experts are forecasting that gross domestic product will develop somewhat less dynamically in the third quarter of 2010 than in the period from April to June, the overall trend will remain positive. The decisive factor in the strong sentiment among consumers is the extremely positive development of the employment market. The number of people registered as unemployed is approaching three million and is likely to dip below this mark before the end of the year. The use of reduced working hours has also declined significantly over recent months.

Companies also believe the prospects for the future to be positive, with the IFO index again increasing in September. Retail in particular is optimistic with regard to developments over the next half-year; indeed, the current situation is considered to be better than at any time since the reunification boom.

Income expectations: highest level for almost 10 years

The economic upturn is also driving consumer expectations of an improvement in their financial situation. Expectations for personal income increased by 9.2 points in September to 45.2 - the highest figure since March 2001.

The present economic recovery is leading to lower unemployment. Many employees see this as increasing the likelihood of collective wage rises. The low level of inflation - currently around 1% - is also serving to increase consumer purchasing power. The improved personal income situation among consumers is already reflected in reality: according to the German Federal Statistical Office, gross monthly income after living expenses increased by 2.3% in the second quarter of 2010.

Propensity to buy: moderate increase at high level

After two months of negative development and stagnation respectively, propensity to buy increased again by 2.8 points in September. The indicator now sits at 30.7 points, considerably higher than the long-term average of 0 points.

Optimism with regard to personal income and the settled price climate in Germany are boosting what is already an encouraging level of buying propensity. In addition, people are becoming less concerned about losing their own job as the situation on the employment market improves.

Consumer climate: strong conditions boost consumer sentiment

The overall indicator forecasts a figure of 4.9 points for October 2010 following a revised 4.3 points in September, meaning that the upturn in the consumer climate has accelerated substantially. This increase in the propensity to buy is attributable in particular to the extremely favourable conditions, such as the economic recovery, the encouraging development on the employment market and the moderate price climate. If the environment continues to develop in a similarly positive manner over the coming months and the consumer climate enjoys further stimulation, private consumption will perform better than originally forecast by GfK, with growth of up to 0.5% rather than stagnation is a realistic possibility.

The survey

The results are an excerpt from the "GfK Consumer Climate MAXX" survey, based on approximately 2000 consumer interviews per month which are carried out on behalf of the European Commission. In this report, the indicators are presented graphically, forecast and commented on in detail. It also includes information on the consumers' spending plans in 20 areas of the durable consumer goods, consumer goods and services markets. The GfK consumer climate survey has been conducted since 1980.