Winter frost for German consumers / Findings of the GfK consumer climate survey in January 2004
28.01.2004, 10:26
Nuremberg, Germany 28. 1. 2004 (PROTEXT/ots) - It was an icystart to 2004 for consumers, following on from the rather frostymood in December 2003. The decision in mid December 2003 tobring forward the tax reform evidently did not have the desiredeffect on consumers of clarifying their future income andcontributions situation. The uncertainty resulting from thecontinued controversy regarding tax, social security and pensionreforms impacted on the mood and consequently, all consumerclimate indicators were down in January.
Following a slight recovery in the consumer mood in thesecond half of 2003, the consumer climate was already beginningto cool off in December. The survey carried out by GfK inJanuary shows that the bad mood among German consumers hasdeteriorated further. It is in direct opposition to the optimismfelt by companies (ifo) and the financial analysts (ZEW).According to the ifo business climate index and ZEW, companiesand financial experts continue to be positive about the future.The recent consumer low is attributable to the unresolvedpolitical debate surrounding the tax, pensions and healthcarereforms. The consumer climate indicator, which had been risingslowly but surely since May last year, is slightly down for thefirst time in months.
Economic outlook: hopes proved to be unfounded
At the end of 2003/beginning of 2004, German consumers wereonce again pessimistic about an economic upturn, followingseveral months of optimism. With a value of -1.6 points inDecember 2003, the economic outlook indicator decreased by afurther 4.2 points in January to stand at -5.8. Consumers donot share the positive expectations of companies, financial andeconomic experts with regard to the economy. However, thecurrent indicator value, which is again way below the long-termaverage value of 0, still exceeds the corresponding value at thebeginning of 2003 by 23.4 points.
Despite the decision to bring forward the tax reform in midDecember 2003, German consumers are still highly unsettled, asthey do not know what to expect in terms of contributions andsubsidies. The concrete financial effects will not show up onpayslips until February or even March this year. This uncertaintyis evidently leading them to lower their expectations regardingany economic upturn.
Income expectations: down again
It is exactly this situation that is impacting on consumers'income expectations, which were also lowered again at the end of2003/beginning of 2004. 2 points down in December 2003, theindicator lost a further 6 points in January 2004 and currentlystands at -14.5. It is of little consolation that this indicatorvalue is still higher than the same period in the previous year,when it stood at -19.4 points.
The current sobering development is the manifestation ofconsumer irritation as to their future financial situation.Present discussions about the patient fee introduced at thebeginning of January are not exactly confidence-inspiring. Inthe consumers' minds, the fear of potential financial burdensoutweighs any possible benefits resulting from the healthcarereform. Pensioners, in particular, are worried about having toget by on less money at the beginning of this year. As of now,for example, they have to pay the full health insurancecontribution and from 2004 onwards, will also have to pay thefull healthcare contribution on company pensions.
Propensity to buy: still at the bottom of the pile
Consumer uncertainty in terms of their future financialdevelopment was also evident in the buying propensity indicator,which dropped by 9.5 points in January. At -41.7 points, thisvalue is the lowest it has been since December 2002 and thegradual increase over the past year has been completely wipedout.
In addition to the factors already mentioned, consumers havealso been deterred from making larger purchases by thepersistently high unemployment rate in Germany.
Consumer climate: slight downward trend once again
In light of the current development in the individualconsumer mood indicators, the overall consumer climate indicatoris also down, if only by a little. The consumer climateindicator for February 2004 has therefore been developeddownwards to 5.0 points following a revised forecast value of 5.3points in January.
The upward trend in the consumer climate as witnessed sinceMay last year has therefore come to a standstill, at least forthe time being. The potential economic recovery in Germany stillgives cause for hope, however, that optimism in the industrywill influence consumer optimism. A decisive change for thebetter will depend on the unsettling discussions surrounding tax,pensions and healthcare insurance being resolved and a far-reaching improvement in the labour market situation.
The survey
These are the findings of the survey, "GfK-WirtschaftsdienstKonsum- und
Sparklima" (GfK financial services, consumer andsavings climate), published by GfK Marktforschung. The resultsare based on monthly consumer interviews carried out on behalfof the EU Commission. In the first half of each month, around2,000 representatively selected people are asked about theirperceptions of the overall economic situation, their propensityto buy and their income expectations.
Income expectations
This index is based on the following question to consumers:'How do you think the financial situation of your household willdevelop in the next 12 months?' (improve - stagnate -deteriorate)
Economic outlook
This index is based on the following question to consumers:'How do you think the general economic situation will develop inthe next 12 months?' (improve - stagnate - deteriorate)
Consumption and buying propensity
This index is based on the following question to consumers:'Do you think it is advisable to make major purchases at themoment?' (good time - neither good nor bad time - bad time)
Consumer climate
This index is used to describe private consumption. Keyfactors are income expectations and buying propensity. Theeconomic outlook has a more indirect effect on the consumerclimate, generally as a result of income expectations.
The next publication date will be 25 February 2004.
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