German consumer climate improves as year draws to a close

Germany’s largest market research institute GfK has released the nation’s consumer s climate study, which resulted in a “significant downward correction of growth forecast” for German GDP.

According to the report, German consumer climate is improving, but slowly. There is greater uncertainty among German consumers due to the persistently tense geopolitical situation coupled with the economic slowdown in the Eurozone.

The German economy has felt the effects of the various international crises in Iraq, Syria and Ukraine as well as the Ebola epidemic in West Africa. The economic weakness in the Eurozone has also been exacerbated by these events.

As a result, the Bundesbank made a significant downward correction of the growth forecast for German gross domestic product.

In line with this, the German Council of Economic Experts has also lowered its prediction for economic growth this year to just 1.2%. Just over a year ago, the organisation forecast 1.9% growth for the year.

The German economy is stagnating and economic experts are only anticipating it to recover over the course of next year. Therefore, next year's growth prospects are estimated to be around 1%.

However, with regard to income expectations, Germans were not affected by sluggish growth in November. Income expectations increased slightly for the second consecutive month, climbing to 48.5 points, which is an increase of 1.6 points.

In November, the development of willingness to buy virtually matched income expectation results. Following an increase of 1.9 points, the indicator value increased to 47.5 points. As Germans are no longer especially concerned that they will lose their jobs, the stable labour market continues to boost enthusiasm for major purchases. Moreover, the falling price of crude oil is also having a positive knock-on effect on energy prices.

The consumer climate also produced upward trend continues, following a value of 8.5 points in November, the forecast for the overall indicator has increased to 8.7 points for December.

German Consumption remains a key pillar to the economic performance. In light of this, it is essential that the situation in international crisis regions does not escalate further.

GfK said: “West African countries which are affected by Ebola and the international community must get a grip on the crisis. The spread of Ebola to Europe would represent a considerable risk for positive economic development in Germany in future.”