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German Consumer Mood Lifts
After two gloomy months, German consumers' outlook has brightened somewhat, according to the consumer climate survey carried out by GfK Marktforschung on behalf of the EU Commission. Income expectations are more positive and willingness to make larger purchases in the next few months has also increased.
Continuing discussions about the reform of the German pension and healthcare systems led to consumer uncertainty in December and January, and frustration with the lengthy process probably made January figures worse than warranted by the actual state of the economy - according to ConsumerScan panel data, retail in January was no worse than in previous years.
This month all consumer indicators displayed a clear upward trend, although there are signs of renewed scepticism from companies (ifo) and financial analysts (ZEW). The latter cooling off is influenced by the high exchange rate - which could have a negative impact on the German export industry, currently a driving force in the economy - and the potential impact on the reforms of the resignation of German Chancellor Gerhard Schröder as leader of the SPD.
The overall economic outlook indicator rose in February to 2.0 points, compared with -5.8 points in December 2003 - the first time the value has been positive since September 2002, and up 28 points on a year ago.
Consumers' income expectations are rising - a 14 point improvement in the indicator cancels out the last 2 months' fall and brings it close to zero. The improvement over a year ago is massive (up 20.6 points) and comes despite new financial burdens on German households as a result of healthcare reform.
Buying propensity also recovered significantly in February, up 16 points to -25.7 points, which again cancelled out the losses of the two previous months. This is the most positive development since the launch of Euro notes and coins in 2002.
The 'GfK-Wirtschaftsdienst Konsum- und Sparklima' survey (GfK financial services, consumer and savings climate) involves around 2,000 consumer interviews in the first half of each month. GfK's web site is at www.gfk.com
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