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Germany's economic expectations stabilize
01
Feb '16
Consumer mood in Germany has changed only slightly in January, while the consumer climate has remained stable. Following a value of 9.4 points in January, the overall indicator is still forecasting 9.4 points for February. While both economic expectations and willingness to buy have risen marginally, income expectations have suffered losses, according to a survey by Gfk SE, Germany's largest market research institute.

The heightened terror threat and the increasingly intense debate on how to solve the refugee crisis have still not had a lasting effect on consumer sentiment, which is currently showing no clear trend and has altered very little in comparison with the previous month, according to the GfK Consumer Climate MAXX survey.

Having ended their six-month decline in December 2015, economic expectations once again stabilized at the start of this year. The indicator climbed slightly by 1.3 points, bringing it to 4.2 points. It has therefore remained in the positive range above its long-term average of 0 points. However, compared with the same time the previous year this still clearly constitutes a minus of 18 points.

According to the survey, despite a number of risks, including the threat of terrorist attacks and the refugee crisis, consumers still believe that the German economy will continue to grow modestly in the next few months. Above all, this improving optimism can be attributed to the extremely strong labor market and rising employment.

The ongoing upswing is also evident from official figures, as according to initial preliminary data from the German Federal Statistical Office, gross domestic product increased by 1.7 percent last year. Experts expect to witness a similar upturn this year.

After enjoying significant gains in the previous month, income expectations once again suffered losses in January. However, the minus of 3.6 points recorded in January is less than the plus of 6.4 points seen in December 2015. The indicator is currently at 47.2 points, which is only slightly lower than the previous year's figure of 47.8 points.

Despite the decline, the income expectations indicator remains extremely high. It is being kept at this level by the increasing rate of employment, strong growth in income, and very low inflation rates.
Looking at recent forecasts for 2016, these favorable conditions are likely to continue in the months to come. For example, according to the latest predictions from the German Institute for Economic Research (DIW), the disposable income of private households is expected to rise nominally by three per cent this year.

The propensity to buy rose once again in January. Although the growth of 3.7 points seems rather moderate, it must be remembered that the indicator was already at an extremely high level before this increase occurred. Its current value of 52.7 points marks its highest level since July 2015, when it stood at 55.4 points.

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