Germany's GfK consumer sentiment indicator jumped above expectations for August from an upwardly revised July. However, by September the forecast value was only marginally more positive. It appears positive consumer sentiment in Germany may have now reached its peak.
As with other parts of continental Europe, recent increased spending has been attributed to consumers' efforts to avoid the 3% increase in the Value Added Tax (VAT) due in January 2007. Regardless, July retail sales still reversed the upward trend seen in June.
The key sales period for wool apparel is generally between September and December. Given the negative effect of the record high temperatures in July we may see a shift to a more solid increase in purchases during the peak buying season, although it is expected to drop off during January from the introduction of the VAT rise.
Consumers are concerned that they will have less money to spend after the increased VAT. This is also coupled with higher oil prices and the likelihood of increased interest rates over the next few weeks.
Australian Wool Innovation Limited