Consumer climate: varied and changing

Findings of the GfK consumer climate survey in August 2004

Following the uniformly negative performance of all consumer climate indicators for Germany last month, the developments in August have differed for each indicator. The good news is that there no longer is a consistent downward trend of the individual indicators. However, the bad news is that there is no marked upward trend either.

While the economic outlook indicator was slightly up, with a stronger rise in the propensity to buy indicator, income expectations were less optimistic. As the minor increase in the August indicators for income expectations and propensity to buy could not compensate for the drop in the previous month, GfK forecasts a consumer climate figure of 2.0 points for September following the revised August figure of 3.0 points.

Overall, it is apparent that the outlook of consumers in western Germany is far more positive than that of their fellow citizens in eastern Germany. The main reason for the consumer climate indicator not making a better recovery is that consumers in eastern Germany continued to be cautious about their spending. In this region, the indicator had already lost in July and, again, fell significantly in August. Conversely, in August there was a boost in the propensity to buy in western Germany. This suggests a divided consumer mood in eastern and western Germany.

It is becoming increasingly clear that private consumption is unlikely to provide any impetus for an upturn in the economy this year. For this to happen, the labour market would need to improve considerably and much depends also on whether the major economies in the world recover, and if so, how dynamic economic growth is in these countries.