O-STA

German consumers regaining their confidence

Findings of the GfK consumer climate survey, July 2003

Nuremberg - The mood among German consumers is gradually brightening. It looks as if they are expecting the economy to improve and are assessing their own income expecations accordingly. However, a word of caution is required when interpreting this development as the propensity to buy indicator, which had risen strongly in the previous month, is still on shaky ground.

The decision by the German government to bring tax reforms forward and the compromise reached by the SPD and CDU/CSU on the reform of the health service, have obviously strengthened consumer confidence.

Following a clear rise in consumer expectations with regard to the economy in the previous month, the indicator rose again by 2.6 points this month. The income expectations indicator rose for the fourth month in a row, up by 1.4 points. By contrast, the propensity to buy indicator failed to build on its strong growth in the previous month and fell by 4.2 points.

As with the corporate sector, the growing optimism on the part of consumers is probably based on hope rather than any real improvement in consumers´┐Ż' actual situations. Consumers are obviously under the impression that something is finally happening politically and that measures are being taken to lead Germany out of its current economic difficulties.

Established on the basis of the various consumer mood indicators, the consumer climate is becoming increasingly stable and will rise to 4.5 points in August. It is becoming increasingly likely that the consumer mood reached its lowest point in spring this year and the outlook for private consumption picking up slightly in Germany by the end of 2003 has improved. Rather than general statements on reform, consumers are now waiting for action and comprehensible results. A fundamental recovery, however, would include in particular a tangible, positive development in the labour market.