Germany: Consumer confidence rises to highest level in over three years
January 25, 2011
Consumer confidence maintained its upward trend that began in June 2010, on the back of strong economic growth and fading fears of rising unemployment. The forward-looking consumer sentiment indicator, published by the GfK institute, jumped to 5.7 points in February, well above both the revised 5.5 points observed in January (previously reported: 5.4 points) and market expectations that the index would fall to 5.4 points. The reading marked the highest level in consumer sentiment since October 2007, suggesting that private consumption should be an important growth driver this year. Together with the GfK's overall consumer indicator, the institute also published three sub-indices (economic expectations, income expectations and buying propensity), which refer to January. According the survey, the propensity to buy improved notably among respondents, on the back of the sustained upturn in the labour market. The economic expectations index remained steady at 58.8 points in January, as consumers are increasingly upbeat about economic growth year, particularly the economy's capacity to create jobs. The propensity to buy bounced back in January, rising from 33.8 points in December to 41.8 points, more than compensating for the decline observed in December. According to the survey, the buying propensity indicator is now at its highest level since December 2006. In contrast, income prospects deteriorated slightly compared to the previous month. The income expectations indicator decreased for a second consecutive month, from 40.3 points in December to 37.7 points in January. However, the sub-index remains 25 points higher than in the same month last year.
Author: Ricardo Aceves, Senior Economist