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Economy in Brief

German Consumers Surprise With A Small Improvement In Sentiment
by Louise Curley October 28. 2008

In spite of the continued financial and economic turmoil, the German consumer's appraisal of the Consumer Climate improved slightly in October from a percent balance of 1.6% in September to 1.8% and is expected to increase to 1.9% in November. These data are from the Gfk Consumer Climate Survey that Haver Analytics recently addedto the GERMANY, G10 and INTSRVYS data bases.

The consumer climate indicator has varied in a relatively narrow band. It reached a low of -3.5% in March of 2003 and a high of 9.1% in November and December of 2006, as can be seen in the first chart. Optimistic German consumers rarely exceed the pessimists by anything but a small margin.

There are three factors influencing the overall climate: income expectations, economic expectations and the consumption and buying propensity. These are shown in the second chart. Income expectations were slightly less negative in October than in September, -12.9% versus -14.1%. The decline in the oil price may have been a factor.

Both economic expectations and consumption and buying propensity became more negative: the former from -15.5% in September to -27.5% in October and the latter from -12.8% to -18.2%.Partly accounting for the sharp decline in the appraisal of the economic situation may have been the timing of the survey. At the time of the survey, the government had not agreed upon its financial rescue package of 80 billion euro in fresh capital and 400 billion euro in loan guarantees to the banks. As a result the measure, the aim of which was to restore confidence in the financial markets, had no positive effect on consumer's appraisal of the economic outlook. Consumer's propensity to buy became more negative in October after have become much less negative in September than in August. Consumers are, however, less reluctant to buy than they were in July and August.

GERMANY  Gfk Consumer Climate (% balance) Nov 08 Oct 08  Sep 08  Aug 08    Jul 08    2007 2006 2005
Consumer Climate 1.9* 1.8 1.6 1.9 3.5 6.2 7.0 3.9
  Income Expectation -- -12.9 -14.1 -16.8 -20.0 11.9 -2.9 -7.4
  Economic Expectation -- -27.5 -15.7 -21.8 -8.0 48.7 18.8 -9.12
Consumption and Buying Propensity -- -18.2 -12.8 -27.9 -26.2 -5.6 46.2 -13.4
* Forecast
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