Consumer Climate in Germany Recovers Slightly After COVID-19 Shock

Consumers in Germany have recovered somewhat in May following the shock triggered by the COVID-19 pandemic, according to GfK. Both economic and income expectations, as well as propensity to buy, are on a slight increase. As a result, GfK forecasts a figure of -18.9 points for June 2020, 4.2 points higher than its level in May of this year.

"The gradual opening of many businesses has certainly contributed to the propensity to consume not having to take any further hits, and increases even slightly at the present time," explains Rolf Bürkl, GfK Consumer Expert. "Nevertheless, uncertainty among consumers is high. In their opinion, the Germany economy is far from being over the hump and they are anticipating a tough recession. Anxiety over job losses remains high and has proven to be a key barrier to consumption at this time, alongside losses in income. Retailers and manufacturers must continue to adapt to this situation.

The improvement in the consumer climate is backed by a decrease in propensity to save (-9.8 points). A significant jump was recorded in April due to the high level of uncertainty. After decreasing twice in a row, economic expectations increased again somewhat in May. The indicator rose by eleven points and stands now at -10.4 points. Nevertheless, this is still significantly below the longtime year average of around zero points, and below last year's value (-12.1 points).

The economy is now being brought back up to speed quicker than it was assumed some weeks ago. Politicians are making great efforts here across various sectors. As a result, consumers are also increasingly hoping that a debacle on the job market can be avoided. Both the Federal Government of Germany and state authorities are investing enormous amounts in financial resources in the form of aid, credit and, in the future, economic programs in order to stimulate domestic demand. This will be even more important since a previously hugely important pillar of the German economy, namely exports, gets very slow off the ground. A range of important buyer countries are currently suffering even more from the pandemic.

After taking record loss in the previous month, income expectations were able to once again increase slightly in May. After an increase of 13.6 points, the indicator now stands at -5.7 points. Nevertheless, it is still a good 63 points below its value this time last year. Reduced working hours and unemployment are leading to significant losses of income for many households. Conversely, the income of pensioners is not at risk of decreasing in the current situation. In fact, in July of this year, the statutory pension was increased by more than three percent.

Propensity to buy is also able to benefit from the improved income expectations. The indicator gained 10.1 points compared to the previous month, climbing to 5.5 points. Compared with last year, however, the current figure still represents a fall of 45 points.