German consumers grow in optimism

29 March 2010

NUREMBURG: Consumers in Germany are growing more optimistic about their personal financial prospects, but many remain cautious when it comes to making major purchases.

According to the monthly survey of 2,000 people in the European nation by GfK, the research firm, the overall barometer of popular perceptions for April was largely static, on 3.2 points overall.

More positively, the panel's economic expectations had climbed by ten points when measured against March this year to a figure of 4.5 points, which is above the long-term average.

In terms of their personal income, the total delivered by respondents grew by a more modest 1.5 points month-on-month to 13.5 points, but this represented an uptick of 25 points compared with March 2009.

When assessing the overall consumer climate, GfK's index was flat at 3.2 points, but this still bought an end to a "downward trend" that has been observable in the country in the recent past.

The "propensity to buy" among shoppers contracted by 0.8 points to 23.4 points, although this marked a substantial improvement on the level of 13.9 points recorded 12 months ago.

The German government has forecast that domestic GDP will rise by 1.9% in 2010, but GfK was doubtful about the role that consumer spending would play in this process.

"It remains to be seen whether the consumer climate will continue to stabilize over the coming months," the company warned.

"Consequently, GfK is standing by its forecast for private consumption this year, that is, that consumption will not make any significant contribution to macroeconomic development."

Such a pessimistic analysis was seemingly confirmed by Carsten Brzeski, a senior economist at ING, the bank, who sounded a note of warning.

"Private consumption remains the Achilles' heel of the German economy. Over the last ten years, only an announced VAT hike and last year's car scrappage scheme were able to trigger some kind of spending spree," he said.

Data sourced from GfK/Associated Press; additional content by Warc staff