German Entrepreneurs and Consumers Shrug Off the Bad News in November

In spite of the turmoil in the Euro Area and the European Union, consumers and entrepreneurs in Germany saw some slight improvement in the  economic climate in November.  The IFO institute reported that entrepreneurs experienced a seasonally adjusted 0.19% increase in the Business Climate Index from 105.0 (2005=100) in October to 106.6 in November. The GFK survey reported that consumers saw a seasonally unadjusted 0.1 point increase in the overall consumer climate from 5.3 to 5.4.  The first chart shows the seasonally adjusted and unadjusted business climate indicators and seasonally unadjusted consumer climate.   The consumer climate indicator is 0.2 points above the year ago figure while the business climate indicators are some 6% below the year ago figure.  

The small  rise in the business climate indicator was due entirely to an increase in expectations for activity in the next six months from 94.0 in October to 94.3 in November.  There was no change in the appraisal of current conditions.  The Business Climate indicator is shown in the second chart together with the Indicators of Current Conditions and Expectations.  In contrast to the entrepreneurs, consumers showed increased concern for the future.  The balance of opinion regarding expectations of their own incomes declined from 36.5% in October to 31.1% in November and the already negative balance of opinion regarding general economic expectations worsened from -6.2% in October to -7.2% in November.  In spite of the pessimism regarding the future, the balance of German consumers willing to increase their buying propensity rose a surprisingly high 9.1 points from 31.2% in October to 40.3% in November and it was the largest year to year increase in the last two years. The third chart shows the components of GFK's Climate Measure:  Income Expectations, Economic Expectations and the Buying Propensity.  The GFK organization also publishes a preliminary estimate of the climate for the month ahead.  It is now estimating a further increase of 0.2 points in the climate to 5.6 in December. 

The data in the above paragraphs are taken from two large surveys: the IFO survey of some 7000 German firms and the GFK survey of some 2000 German consumers undertaken on behalf of the European Commission.  The IFO data are expressed as indexes with a base year of 2005=100.  The GFK component data are expressed in terms of percent balances.  The overall Climate is based on income expectations, buying propensity and saving trends and is expressed in points that have ranged over life of the indicator from -3.5 in March 2003 to 9.1 in both November and December, 2006.  The fourth chart shows the history of the GFK Consumer Climate indicator.

IFO Survey (2005=100)	NOV 11	OCT 11	NOV 10	M/M % chg	Y/Y % chg	2010	2009	2008
Business Climate SA	106.6	106.4	113.6	0.19	-6.16	107.8	90.7	100.5
Business Climate NSA	104.6	105.0	111.7	-0.38	-6.36	107.8	90.7	100.5
Current Conditions	116.7	116.7	117.5	0.0	-0.68	107.8	88.3	108.6
Expectations 6 mo ahead	97.3	97.0	109.9	0.31	-11.46	107.9	93.4	93.0
GFK Survey				M/M pt chg	Y/Y pt chg
Climate  (Points)	5.4	5.3	5.2	0.1	0.2	11.0	3.1	3.3
Economic Expectations	-7.2	-6.2	46.0	-1.0	-63.2	28.2	15.2	-2.8
Income Expectations	31.1	36.5	36.0	-5.4	-4.9	27.3	-0.2	-7.6
Con & Buying Propensity	40.3	31.2	22.5	9.1	17.8	25.7	20.3	-15.1