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German Recovery Hopes 'Premature'
There is little sign of German economic recovery from the May 2003 GfK consumer climate survey, conducted on behalf of the European Commission. The indicator for economic outlook fell slightly, almost entirely cancelling the increase in the previous month. Income expectations of German consumers reflect a slight upward trend of three per cent, but the propensity to buy is down for the second month in a row, losing more than seven points.
Following the end of the war in Iraq, domestic issues are top of mind again. The continued rise in unemployment figures as well as the ongoing debate about budget restructuring, economic development and planned reforms are conspiring to keep consumer expectations in check.
After a slight improvement in April, hopes of an imminent economic recovery have proved premature. The economic outlook indicator fell by a good six points in May and currently stands at -28.2 points, almost back to its March level. Unlike the positive trend among companies, which is expressed by the ifo business climate index, German consumers are not convinced that a recession can be ruled out entirely, while some experts are even predicting a high probability of the German economy going into recession. The revaluation of the euro may have an adverse effect on exports, which are the driving force behind the economy.
By contrast, consumer expectations regarding their own income rose slightly in May 2003. Several factors are acting to strengthen the purchasing power of consumers and reassure them - these include a slower price increase rate, a rise in the euro against the US dollar and pound sterling and positive news from stock exchanges around the world. However, with -12.6 points, the indicator remains well below the figure for the same month in 2002, and propensity to buy is not increasing. The indicator for the latter fell for the second month running, losing 7.6 points in May to stand at -39.9 points - almost at the level of last December.
The indicator forecast for June is 3.8 points (compared with 3.6 points in May). Although the downward trend in the mood among German consumers has been stopped, there is little to suggest a dramatic improvement in the consumer climate in the immediate future.
GfK's 'GfK-Wirtschaftsdienst Konsum- und Sparklima' (Financial Services, Consumer and Savings Climate) survey is published by GfK Marktforschung and results are based on monthly consumer interviews carried out on behalf of the EU Commission. In the first half of each month, around 2,000 representatively selected people are asked about their perceptions of the overall economic situation, their propensity to buy and their income expectations.
Gfk currently employs 4,900 people worldwide, of which around 1,450 are based in Germany. Further information is at www.gfk.de
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