Consumer views mixed in Germany

28 March 2012

BERLIN: Consumers in Germany have grown more downbeat about the country's economic prospects but remain willing to make purchases, according to a poll.

Based on a monthly survey of 2,000 people, GfK, the research firm, reported that its overall index stood at exactly six points in March, and predicted totals would moderate slightly to 5.9 points in April.

When discussing economic expectations, scores rose by 1.3 points to 7.2 points in March, although this failed to offset the contraction of 1.6 points recorded in February.

Moreover, this indicator still stands some 42 points behind that recorded a year ago, as the continuing instability being experienced in the Eurozone continued to weigh on participants.

Upon assessing the situation regarding the outlook for their personal incomes, respondents returned a total of 34.3 points, a decrease of seven points, negating the 7.2 point leap from February.

"Record prices for petrol and diesel particularly affected the income indicator in March. Consumers ... consider their purchasing power to be under threat as a result of these high prices, having to spend an ever larger share of their available income on energy and fuel at present," the study said.

The rate of inflation climbed to 2.3% in February, and while most observers anticipated this figure should decline to below the 2% mark for the year as a whole, the impact is an adverse one.

"In view of current wage negotiations, there is also as yet not an identifiable trend of what salary increases employees can expect this year. This uncertainty is surely also not contributing to an improvement in income optimism," GfK argued.

Elsewhere, the popular willingness to buy fell by a modest 0.6 points to 38.6 points, but GfK stated this does constitute a "very good level" and was also higher than a year ago.

"The stable labour market in Germany, in particular, is a major reason for this desire to spend," the study said. "Given the lack of trust in financial markets and historically low interest rates, consumers also continue to be more likely to make high-value purchases rather than saving their money."

Looking ahead, GfK forecast that private consumption will increase by 1% in real terms during 2012, thus playing a crucial role in protecting the economy from the recession.

Data sourced from GfK; additional content by Warc staff