Facebook Blogging

Edward Hugh has a lively and enjoyable Facebook community where he publishes frequent breaking news economics links and short updates. If you would like to receive these updates on a regular basis and join the debate please invite Edward as a friend by clicking the Facebook link at the top of the right sidebar.

Thursday, March 27, 2008

GFK Consumer Confidence Index april 2008

German consumer confidence unexpectedly rose slightly for the first time in three months as we enter April, as rising wages slightly boosted households' willingness to spend. GfK AG's forward looking sentiment index for April, based on a survey of about 2,000 people, increased to 4.6 from 4.5 in March, according to the Nuremberg-based market-research company today. What we can see from the chart is that while sentiment is now well down from the heights of the midddle of last year, it has - for the moment - stabilised somewhat.




The following extracts are from the GFK report which can be found in its entirety following the link above:

Consumer climate: stable developments with slight upward trend
The positive development of the indicators this month has resulted in a slight upward trend for the consumer climate. The overall indicator forecasts 4.6 points for April, which represents a minor improvement. The current greater tendency towards savings prevented a more substantial increase in the indicator. In the first three months of this year, the indicator has hovered at 4.5 points.

It would certainly be too soon to speak of a trend reversal. High rates of inflation and new record values for the US dollar and the price of crude oil are likely to stop consumers from immediately giving up their restraint in terms of consumption. For a trend reversal to materialize, prices will need to settle down in particular. This would put the focus back on positive conditions, such as the good situation in the labor market.

In view of current price trends and the continued high rates of inflation, the previous consumption forecast of 1.5% in real terms does not seem attainable. GfK is therefore revising consumption expectations for 2008 to 1%.




Economic expectations: restrained optimism
After the setback last month which amounted to a decrease of more than 14 points, the economic expectations of German consumers stabilized again in March. The indicator rose marginally by 0.4 points and now stands at 15.0 points.

A degree of uncertainty persists among German citizens with regard to economic developments. The effects of the US mortgage crisis, which have resulted in significant capital losses and the associated credit squeeze for major banks, have somewhat dampened optimism regarding the economy. The weak US dollar and the growing number of signs pointing towards recession in the USA are also depressing consumer sentiment. As consumers are currently unable to assess the extent to which these negative developments will ultimately affect the German economy, they have remained cautious.






Income expectations: collective wage agreements provide hope
Following the marked gains of more than 4 points in the prior month, the indicator for income expectations continued to climb in March. With an increase of 2 points, the rise remains lower than in the prior month. The indicator currently stands at 1.5 points and has returned to the positive range for the first time since September 2007.

The latest collective wage agreements in the metal industry and for train drivers, which were favorable from the point of view of consumers, have achieved the intended effect. It appears that hopes of also achieving a good outcome in the imminent negotiations are outweighing inflation-related concerns. Respondents are slightly more confident that wages and salaries will rise above the rate of inflation, making an increase in income possible in real terms.






Propensity to buy: signs of a slow recovery
The propensity to buy indicator has gone up again in March. However, the increase of almost 5 points means that the losses of the prior month can only partly be compensated. At currently -10.2 points, the propensity to buy in March is a good 2 points above the corresponding figure for the prior year. However, the propensity to buy indicator remains considerably below the long-term average of 0 points.

Despite ongoing fears of inflation, consumers appear more prepared to make major purchases. Nevertheless, some uncertainty remains in the wake of rising energy and food prices.

No comments: