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Monday, April 27, 2009

German Consumer Confidence Steady In April

German consumer confidence remained steady for a third consecutive month in April as slower inflation boosted household purchasing power and the pace of the economic contraction slowed slightly. GfK AG’s forward looking confidence index for May, based on a survey of about 2,000 people, remained unchanged from April's revised 2.5 percent reading.

This reading indicates that the German consumer climate remains robust overall, despite an economic environment which is generally recessive, with consumers still defying the gloomy signals they are recieving over orders and production. However, the index remains at a very low level and so, while domestic demand may provide partial relief from the heavy losses in exports and investment, it will by no means be able to offset them completely.

GFK emphasised that the greatest threat to future improvements in the consumer climate comes from the job market.

After dropping massively in March this year, the indicator of economic expectations was up again by 1.6 points in April to stand at its current level of -31.2 points. While consumers remain generally very pessimistic about the outlook, the downward plunge in the indicator which began in the middle of 2007 and continued until the beginning of 2009, has been gradually easing over the last few months.

Income expectations are also up in April - by 3.4 points - and now stand at -8 points. On this basis, and with the indicator recovering by 12.5 points since reaching its lowest point in January, the general rating for the year 2009 is positive in terms of income expectations. The key here is evidently the general stabilisation price index. In March this year, the rate of inflation was just 0.5%, which is attributable in the first instance to the reduced prices for energy and some foods, which added to consumer purchasing power. In addition, pensioners see themselves facing pension increases. From July 1, pensioners living in eastern Germany will receive a 3.4% rise and those in western Germany will be receiving 2.4% more.

Thus the propensity to buy indicator held up well, and although it has dropped 1.5 points, at its current level of 12.4 points it is still 17 points above the level at this time last year.

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