GfK Group: While consumer expectations improve, the propensity to buy remains unchanged / Findings of the GfK consumer climate survey, August 2003

Nuremberg, Germany 29. 9. 2003 (PROTEXT/ots) - While Germancompanies (ifo) and analysts (ZEW) are confident about thefuture, expectations and the climate among German consumersstill vary widely. Although consumer expectations with regard tothe economy are improving, there has been no change in theirpropensity to buy. At the same time, income expectations arefalling once again.

Economic outlook continues to improve

In August, as in previous months, consumers were once againhopeful with regard to the economic development. They obviouslybelieve that slowly but surely the German economy is recoveringfrom the recent low. For the third time in a row, the economicoutlook indicator rose by 3.5 point to -9.2 points at present.This reflects the fact that fears of a recession are abating. Itcan be assumed that the optimism with regard to the economicoutlook is based on the belief that there will soon be arecovery rather than the actual current economic conditions.

Income expectations: first signs of decline for a long time

Consumers are far more cautious when it comes to their ownincome expectations than the economy as a whole. The relevantindicator fell by 3.3 point to -5.9 points, which put an end tohopes that the income expectations indicator would reach thezero mark in August, returning to the average value of many yearsafter a 10-month period below zero.

Propensity to buy still low

There is no movement to speak of in terms of consumers'propensity to buy. Although the relevant indicator increased by0.7 per cent in August, the current figure of -33.2 pointsreflects that consumers are still feeling very insecure as tohow much they should be spending.

Neither the current economic situation nor the development ofthe labour market are currently producing any substantiallypositive effects that may stop the decrease in the propensity tobuy, which has lasted for almost two years. The high level ofunemployment in particular, which continued to increase, ishindering any perceptible improvement in the propensity to buy.

The excitement of having more disposable income as a resultof the tax reforms has clearly given way to fears of having topay at least as much in tax as before, or possibly even more.The fact that retired people will need to wait until next yearfor their benefits to be adjusted in order to relieve thepressure on the state pension fund is not exactly cheering newseither.

Conclusion: consumer climate stable, but lacking dynamicdevelopment

The continued stabilization of the consumer climate with aslight upward trend, which is calculated by extrapolatingseveral indicators, is mainly due to the positive economicoutlook. Based on the overall indicator, the forecast forSeptember is 4.8 points (after 4.6 points in August). Thisincreases the probability of consumption stabilizing further inthe course of this year, however, it is unlikely that thedynamic development hoped for will materialize. A fundamentalrecovery of the consumer climate requires a tangible, positivedevelopment in the labour market. More certainty with regard toincome and, as a result, the ability to plan ahead would alsohelp to accelerate recovery of the consumer climate.

More: www.gfk.com ots Original Text Service: GfK Group Internet:http://www.presseportal.de Contact: Ulrike Schoenberg phone +49 (0)911 395 2645ulrike.schoeneberg@gfk.de

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