German consumers in the mood for pre-Christmas spending

Consumers believe that the German economy will continue to recover strongly over the coming months. This is demonstrated by the sixth consecutive increase in economic expectations. Driven by this positive economic outlook, income expectations and the propensity to buy also rose tangibly this month having declined in October. This development is providing further support for the overall indicator of the GfK consumer climate, as well as laying the foundations for domestic demand to increasingly become a reliable pillar of the economy.

Economic expectations: optimism continues to grow

The increase of 9.8 points in November is already the sixth consecutive monthly rise in economic expectations. The indicator is showing 65.8 points at present, almost 65 points higher than one year previously. It is more than three years since the indicator last reached such a high level.

This pronounced sense of economic optimism is being driven in particular by the extremely positive news from the employment market. The number of people registered as unemployed is falling continuously; in October, it reached its lowest level since November 1992. The number of employees on reduced working hours, which was still around 1.5 million last summer, has also declined dramatically.

The positive economic outlook on the part of consumers is shared by experts: the latest annual report by the German Council of Economic Experts is forecasting that the recovery will continue in 2011, albeit at a slightly more moderate pace, with average unemployment for the year amounting to just under three million.

Income expectations: return to confidence

The positive economic sentiment meant that income expectations also improved tangibly in November, with the rise of 8.9 points almost fully offsetting the downturn recorded in the previous month. The indicator is currently showing 44.9 points.

Declining unemployment and increasing reports of a future shortage of skilled workers are strengthening employee hopes of higher income growth. In addition, some companies have already announced that the collective wage and salary increases agreed for the coming April will be brought forward by two months or that they will make one-off payments to their workforce. Employees ultimately expect to enjoy greater scope for pay rises in the new collective wage negotiations in the coming year.

The moderate price climate is also having a positive effect on income prospects. The current level of inflation of around 1% is stabilising the purchasing power of income.

Propensity to buy: upward trend resumes

In November, the propensity to buy easily offset the previous month's downturn, rising by 16.8 points - more than double the decline of -8.2 points recorded in October. The indicator has returned to an upward trend with a current figure of 39.3 points.

The prospects of an improved financial situation and dwindling fears of job losses mean that consumers are becoming more prepared to open their wallets once again. This is unquestionably good news in light of the imminent Christmas period.

Consumer climate: powering towards the end of the year

The overall indicator is forecasting 5.5 points for December 2010 following a revised 5.1 points in November. This means that the trend is positive once again. Accordingly, GfK is reiterating its existing forecast of growth in private consumption of around 0.5% this year.

With consumer sentiment powering towards the end of the year and good conditions such as falling unemployment and moderate price development, the foundations have been laid for an even more impressive 2011 in terms of the consumer climate. Consumption growth exceeding the 1% mark is not an unrealistic expectation.

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.

The next publication date is 21 December 2010.