While consumer expectations improve, the propensity to buy remains

Findings of the GfK consumer climate survey, August 2003

Nuremberg, Germany (ots) - While German companies (ifo) and analysts (ZEW) are

confident about the future, expectations and the climate among German consumers

still vary widely. Although consumer expectations with regard to the economy are

improving, there has been no change in their propensity to buy. At the same

time, income expectations are falling once again.

Economic outlook continues to improve

In August, as in previous months, consumers were once again hopeful with regard

to the economic development. They obviously believe that slowly but surely the

German economy is recovering from the recent low. For the third time in a row,

the economic outlook indicator rose by 3.5 point to -9.2 points at present. This

reflects the fact that fears of a recession are abating. It can be assumed that

the optimism with regard to the economic outlook is based on the belief that

there will soon be a recovery rather than the actual current economic


Income expectations: first signs of decline for a long time

Consumers are far more cautious when it comes to their own income expectations

than the economy as a whole. The relevant indicator fell by 3.3 point to -5.9

points, which put an end to hopes that the income expectations indicator would

reach the zero mark in August, returning to the average value of many years

after a 10-month period below zero.

Propensity to buy still low

There is no movement to speak of in terms of consumers' propensity to buy.

Although the relevant indicator increased by 0.7 per cent in August, the current

figure of -33.2 points reflects that consumers are still feeling very insecure

as to how much they should be spending.

Neither the current economic situation nor the development of the labour market

are currently producing any substantially positive effects that may stop the

decrease in the propensity to buy, which has lasted for almost two years. The

high level of unemployment in particular, which continued to increase, is

hindering any perceptible improvement in the propensity to buy.

The excitement of having more disposable income as a result of the tax reforms

has clearly given way to fears of having to pay at least as much in tax as

before, or possibly even more. The fact that retired people will need to wait

until next year for their benefits to be adjusted in order to relieve the

pressure on the state pension fund is not exactly cheering news either.

Conclusion: consumer climate stable, but lacking dynamic development

The continued stabilization of the consumer climate with a slight upward trend,

which is calculated by extrapolating several indicators, is mainly due to the

positive economic outlook. Based on the overall indicator, the forecast for

September is 4.8 points (after 4.6 points in August). This increases the

probability of consumption stabilizing further in the course of this year,

however, it is unlikely that the dynamic development hoped for will materialize.

A fundamental recovery of the consumer climate requires a tangible, positive

development in the labour market. More certainty with regard to income and, as a

result, the ability to plan ahead would also help to accelerate recovery of the

consumer climate.