propensity
27.08.2020

Consumer climate is on the rise

The Germans are gradually venturing back to their usual consumer behavior. Economic expectations are rising slightly for the third time in succession, and with it income expectations and the propensity to buy.

According to market researchers at Gfk, a sharp downturn in consumer sentiment, is immediately followed by a rapid recovery. For the third time in a row, the consumer climate is rising noticeably, and the indicator has thus recorded a growth of 23 points since its low point in spring.

Growth due to reduction in value-added tax

The reduction in value-added tax is also said to have made a noticeable contribution to this.

“Consumers apparently intend to pre-empt planned major purchases, which will help consumption this year,” explains Rolf B├╝rkl, GfK consumer expert. “However, it is doubtful whether this will have a lasting effect. Retailers and manufacturers must prepare themselves for the fact that the propensity to consume could decline again when the original VAT rate comes into force in January 2021”.

In 2007, in the run-up to the VAT increase, the propensity to buy also increased and purchases were brought forward. According to market researchers, the willingness to consume and thus the indicator fell back to its original level once the higher tax rate had come into effect. A similar development is to be expected with the increase in the old tax rate in January 2021.

Propensity to buy and income prospects

Even if these effects are unlikely to be sustainable on the basis of experience to date, the measure is nevertheless expected to have been an important support for consumption this year. After increasing by 23.1 points, the propensity to buy is now at 42.5 points. In comparison, this is only four points less than in the previous year.

The propensity to buy has decreased by four points compared to the previous year (source: iStock / ridvan_celik)

Income expectations also increased in July for the third time in succession. Here the indicator gained 12 points. Nevertheless, a minus of 32 percent is recorded compared to the previous year.

Economic outlook

In July, economic expectations are also improving with a gain of 2.1 points. It thus currently stands at 10.6 points.

It appears that German consumers are increasingly gaining the impression that the German economy can recover within a manageable time frame. The prerequisite for this is that the infection rates in Germany do not rise any further and that there is no further lockdown. In this way, the economic recovery package that has been passed could help the economy and consumers.

Source cover image: iStock / Tinpixels