Economic trends and expectations contradict each other

Willingness to buy has once again reached a peak according to the current consumer climate study prepared by the Association for Consumer Research (GfK). The consumer climate indicator for July will presumably rise by 0.8 points to 7.8 points. The main reason for this, however, seem to be expectations of higher prices due to the VAT increase at the beginning of next year, says Rolf Bürkl, a market researcher with the GfK in an interview with the Pressetext news agency.

This conclusion seems indeed to be plausible given that at the same time the economic and income outlooks are seen with much more skepticism by those interviewed as compared to one moth ago. Other important reasons for this skepticism are the discussions on the future financing of the German health care system and the reform of the labor market, says Mr. Bürkl. Thus, the indicator of economic expectation has fallen by 10.5 points in June, whereas the indicator measuring personal income expectation has decreased by 8.5 points. Even the enthusiasm about the football world championships seems to not have been able to compensate for this low level of expectations. Mr. Bürkl cannot rule out that expectations may even deteriorate after the football event, given that the political matters of health care and labor market will then regain much more importance.

These contradicting trends in consumption and expectations are reason enough to doubt that Germany has reached a genuine economic u-turn. According to Mr. Bürkl only a permanent brightening up of economic expectations can lead to an improved situation on the labor market. Further details of the study can be found on the GfK website. GERMAN