Germany Consumer Confidence


Germany: Consumer confidence surges in December

November 23, 2010

Consumer confidence continues to improve as lower unemployment and an improving economic outlook fuelled income expectations. The forward-looking consumer confidence indicator for December, published by the GfK institute jumped to 5.5 points, up from the revised 5.1 points observed in the previous month (previously reported: 4.9 points). The reading beat market expectations which had anticipated an unchanged index in December. While the GfK's overall consumer confidence indicator refers to December, the institute also published three sub-indices (economic expectations, income expectations and propensity to buy), which refer to November. According to the survey, the improvement over the previous month was broad-based. The economic expectations index continued to trend upwards and rose 9.8 points in November, driving the index to 65.8 points, which represents the highest level in more than three years. The optimism displayed by consumers is mainly the result of confidence in the ongoing recovery, as well as better-than-expected labour market developments. In October, unemployment fell below 3 million for the first time in more than two years. With the unemployment rate at 7.5% and on a downward trend, the government has recently declared full employment ? defined as a jobless rate below 4.0% ? to be an achievable target. Improved income expectations were the result of general economic optimism and increased by 8.9 points to 44.9 points, which fully offset the fall observed in the previous month. In addition, the positive reading was supported by complimentary announcements by some companies that the collective wage and salary increases will become effective two months before April. According to the GfK, the subdued inflationary pressures will also have a positive effect on income prospects. Furthermore, the propensity to buy bounced back in November, rising by 16.8 points over the previous month and more than offsetting the 8.2 point fall registered in October. The reading was the result of the consumer's optimistic assessment of their financial situation and dwindling fears of job losses.

Author:, Senior Economist

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