The FINANCIAL -- Overall, consumer mood appears to be stable in November. Economic expectations and propensity to buy have increased slightly, while income expectations have experienced a minimal decline.
The overall consumer climate indicator forecasts 9.8 points for the last month of this year, after a figure of 9.7 points in November, according to GfK.
Overall, consumers' assessments appear to be extremely stable this month. For the second time in succession, consumers have become more optimistic about overall economic prospects. Income expectations have stabilized, falling only very marginally after two more significant declines in a row. Moreover, propensity to buy has risen back above the 50-point mark. Consequently, the consumer climate has enjoyed marginal growth.
The consumer mood survey took place primarily in the period before the US Presidential Election, so any possible effects of the vote barely had any effect on the current consumer climate.
Economic prospects: second increase in succession
Once again, economic prospects have brightened a little. The indicator has increased slightly for the second time in succession. Economic prospects have increased by 2.3 points, reaching a figure of 15.3 points. Thus, the indicator is now more than twenty points higher than its corresponding value last year.
Contrary to consumers' growing optimism, German economic growth paused for breath in the third quarter of this year. According to figures recently published by the German Federal Office of Statistics, gross domestic product (GDP) in the third quarter increased by 0.2 percent compared with the second quarter.
However, in the first and second quarters of 2016, the growth rates were 0.7 percent and 0.4 percent respectively (source: www.destatis.de). Growth was slowed down primarily by a slight fall in exports, while, according to the Statistics Office, private consumption provided positive impetus.
Experts predict that the fourth quarter will show more dynamic growth in terms of GDP. Hence, it still seems realistic to expect that GDP in 2016 will increase by 1.9 percent overall compared with 2015. The Council of Experts assumes as much in its fall report. The experts forecast a growth figure of 1.3 percent in 2017, whereby weaker growth is primarily a consequence of calendar effects.
Barely any change in income expectations since the previous month
After two successive declines, income expectations have stabilized again in November. After a minimal fall of 0.3 points, the indicator is currently at 44.5 points. Hence, it is at almost exactly the same level as in the previous year (November 2015: 44.4 points).
Increasing inflation rates have evidently gnawed away at the purchasing power of private household incomes. The rate of increase in consumer prices reached a two-year high of 0.8 percent in October, after figures of 0.4 percent and 0.7 percent had been recorded for August and September respectively (source: www.destatis.de). One major reason for higher inflation is that energy prices are slowly increasing again. Increasing prices have had a negative impact on buying power – in other words, total net household income – and as a result, income prospects were assessed rather less optimistically.
Nevertheless, consumers are still in a buoyant mood, as proven by the level of the indicator. And there is a good chance that the mood concerning incomes will also remain optimistic in future. In particular, a stable employment situation will ensure that incomes will also increase next year.
Propensity to buy: slight gains
Improving economic prospects and the stabilization of income expectations have ensured that propensity to buy increased slightly in November. The indicator increased by 1.3 points, reaching a figure of 51.2 points. This represents a minor increase of 2.3 points compared with last year.
In addition, propensity to buy has definitely been given extra momentum this month by propensity to save. After falling to its historic low point in April, it recovered somewhat in recent months. However, it has fallen back considerably in November. It is not currently possible to foresee whether there will be a lasting change in the trend. Therefore, in the eyes of consumers, saving is still not a very attractive option, and consumers are more inclined to spend money. This should certainly make the commercial sector very happy, in light of upcoming Christmas commerce.
The little pleasures of life are very popular
The stability of consumers’ economic expectations and income expectations means that they are in a buying mood at the end of the year. Propensity to buy is not the only thing to have made a slight gain. According to a recent GfK survey, significantly more than three quarters of Germans agree that this is a good time to treat themselves to the little pleasures of life (86 percent). The consumers’ current circumstances have no bearing on this. Hence, there is a consistently high level of agreement with the above statement (more than 70 percent) not only among consumers living in affluent circumstances, but also among those living in middling or modest circumstances.
Consumer climate stable and at a good level
For December 2016, the overall indicator forecasts 9.8 points, after a figure of 9.7 points in November. This means that, just in time for upcoming Christmas commerce, the indicator has increased slightly again, after several successive declines.
It remains to be seen whether the outcome of the US elections, which surprised many people, will have any lasting effects on consumer mood. It will not be possible to measure any possible effects until the December survey at the earliest.
GfK confirms its forecast that real private consumer spending will increase by around 2 percent this year. This is because the employment situation is still very encouraging, and because incomes have enjoyed a positive trend.
Thus, both this year and next year, private consumption will remain a crucial cornerstone of economic development in Germany.