GfK is forecasting a declining consumer climate at the end of the year. Unresolved economic conflicts and an increasing propensity to save as well as weak economic and income expectations are offset by a stable propensity to buy. Nevertheless, retailers can remain optimistic about the Christmas business.

For December 2018, GfK forecasts a decline in the consumer climate from 10.6 to 10.4 points. This is justified by the increasing propensity to save and weakening economic and income expectations. Nevertheless, consumers’ propensity to buy remains unaffected. This serves as a sentiment indicator and expresses whether consumers are inclined to make a larger purchase in the future.

Economic conflicts unsettle German consumers

Unresolved trade conflicts between China and the EU with the USA and the forthcoming Brexit lead to uncertainty among German consumers. These declining economic prospects in turn lead to falling income expectations. At 50.2 points, however, this is a positive result.

The high value of the indicator is related to rising employment and the associated high income. According to GfK, however, high price levels in areas such as the energy sector mean that purchasing power is lacking elsewhere. The price increase of 2.5% for petrol and heating oil in October compared with the previous year is the highest for ten years.

Consumer propensity to buy remains positive

The difficult global economic situation and higher inflation do not appear to be damaging the propensity to buy overall. The propensity to buy increased slightly by 1.6 points (57.5 points). A higher value of 60 points was last recorded in April.

Despite the depressed consumer climate, GfK confirms its consumption forecast according to which real private consumer spending will rise by 1.5% this year.

German Retail Association confirms GfK consumer climate forecast

The Handelsverband Deutschland (HDE) comes to similar conclusions. The HDE consumption barometer cools down slightly in December. Economic expectations are therefore falling, but the German Retail Association also confirms a stable propensity to buy.

Against this backdrop, retailers may remain optimistic in the Christmas business as well. Although the expectations of the industry have not yet been fulfilled, this can be explained above all by weak customer frequency in the city centres. The HDE expects sales to increase by 2% in the Christmas business this year before a slight dip in consumption is expected at the beginning of 2019.

The consumer climate study is based on a monthly survey of 2000 consumers. Retail accounts for around 30% of private consumer spending.

The consumption barometer also surveys 2000 people each month on their propensity to buy, their propensity to save, their financial situation and other factors relevant to consumption.

 

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Link: current press releases of GfK

Image: iStock

//CF