Good consumer climate encourages to buy more

The consumption behaviour of German consumers has again substantially improved in May. This is the finding of the May 2006 consumer climate study prepared by the GfK institute. There is an anticipation of economic development which is as positive as it was for the last time five years ago. The indicator of the propensity to purchase is as high as never before. The expectations of salary rises have also slighty increased, though only in the Western federal states. The overall good development of the single indicators has also had a positive effect on the consumer climate: Whereas the overall indicator was 5.8 points for May, the value forecast for June is 6.8 points.

Consumers´ expectations of economic development have increased substantially in May in the East as well as in the West of Germany. The respective indicator rose by 8.7 points to 30.9 points. Compared to last year´s indicator, this result amounts to a plus of about 47 points. Such a development encourages to buy more. The relevant indicator rose by 15.3 points to 49.8 points as compared to last month, which also amounts to the highest value ever recorded in the study. According to another GfK study, the discussion about a VAT rise caused 13 percent of consumers to make advanced purchases, in particular of furniture, household appliances and consumer electronics as well as investments in refurbishment. 40 percent have not yet made up their minds on whether they should purchase or refurbish right now or after the VAT rise.

According to the assumptions of the GfK experts, there are several reasons for the consumers´optimism, which are, among others, a still strong confidence in the government, the collective wage settlements which pleased employees in the metal and electronics industries and advanced consumption as a reaction to the coming VAT increase at the beginning of 2007. In contrast to consumers, financial analysts and entrepreneurs are seen to be more sceptic this month on the economic development, according to statements of the Centre for European economic research (ZEW) and the ifo-Institute (ifo) respectively. However, the indicators established by these institutions are still above their average values recorded over many years.

The figures presented above are only an extract from the “GfK consumer climate MAXX” study. Several other findings of the study are available here. GERMAN

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