GfK's Consumer Climate Improves But...

The GfK measure of the Consumer Climate rose to 5.9 points in August from 5.8 points in July and is forecasted to remain at 5.9 points in September.  The series is an indicator of private consumption and is influenced by the buying plans of consumers, changes in the expectations of their income and those of the general economy, all of which are estimated by GfK.   However, there are other factors and methodological considerations that affect climate indicator both positively and negatively.  With  the balance of opinion lower in August than in July on consumer buying plans, their own income expectations and those for the general economy, apparently these other factors are currently exerting a positive influence.  The attached chart shows the balance of opinion on the Consumer Climate, together with the balances of opinion on buying plans, income expectations and expectations for the general economy.*

The GfK survey shows that, in August, German consumers became slightly more cautious in their spending plans as a result of a less optimistic appraisal of their income prospects and increased pessimism regarding the general economic outlook.  The balance of opinion on buying plans declined 2.7 points to 33.1% in August from 35.8% in July and 3.8 points from 36.9% in August, 2011.   The balance of opinion on the outlook for their own income declined 4.7 points to 31.6% in August from 36.3% in July but was four points above August, 2011.  The big change in German consumers' opinions took place in the expectations for the general economy.  The balance of opinion on expectations for the general economy fell 13.3 points to -18.9 in August from  -5.6% in July and 32.3 points from August of a year ago.

The GfK Consumer Climate Survey for Germany released today might help explain the big drop  in yesterday's IFO report on the balance of opinion in retail trade from +5.1% in July to -4.7% in August.  A more cautious consumer and a big drop in expectations for the general economy would be causes of concern for the retailer.

* The Consumer Climate measure is much less volatile than the other series.  Since its inception in January 2002, it has varied between -3.5 and 9.1.  It has a mean of 3.7 and a standard deviation of 2.8.  At 5.9, currently, it indicates a relatively good level of private consumption.