The optimism of German consumers is fading noticeably in October. Around three-quarters of consumers currently assume that COVID-19 poses a major or very major threat, and about half are concerned or very concerned about their personal future. Both economic and income expectations as well as propensity to buy have had to take losses. GfK is thus forecasting a figure of -3.1 points for November 2020, 1.4 points lower than in October of this year (revised -1.7 points). These are the findings of the GfK Consumer Climate Study for October 2020.
“The rapid increase in infection rates is leading to a tightening of restrictions brought on by the pandemic. Fear of a second lockdown, should infections get out of control in the coming winter months, is also increasing,” explains Rolf Bürkl, GfK Consumer Expert. “As a result, the in parts significant recovery we saw in consumer sentiment at the start of the summer has come to a standstill and is causing the consumer climate to plummet once more. An increase in propensity to save in October has also contributed to this.”
This is also reflected in the results of a recent GfK eBUS® survey. According to this, around three-quarters of consumers in Germany (74 per cent) feel that COVID-19 poses a major or very major threat. 17 per cent see the risk as somewhat more relaxed and six per cent do not feel threatened at all. When it comes to their personal future – keeping the potential economic effects of the crisis in mind – half (51 per cent) are concerned or very concerned. Some 34 per cent say they are less concerned and 11 per cent are not worried at all. What is interesting about these results is that they have never been as negative as they are now since the weekly measurement began back in April 2020.
Whether the consumer climate can again stabilize in the coming months will depend above all on how infection rates progress.
Economic outlook receding significantly
Economic expectations among Germans is the biggest loser among sentiment indicators in October. After five increases in a row, the economic mood has now lost seventeen points, falling to 7.1 points. The good news is that this is still a positive of nearly 21 points compared to the same period last year.
Consumers are apparently assuming that the quick recovery of the economy that had been hoped for previously is slowing due to the increased and rapid spread of infections in Germany. In the latest edition of “Joint Economic Forecast Fall 2020” (Gemeinschaftsdiagnose Herbst 2020), economic experts too are assuming that recovery will be slowed by the pandemic and only manage to reach its pre-crisis level in the first quarter of next year. They have therefore downgraded their predictions for this year and the next.
In addition to this, some of our most important trading partners, such as France, Spain or the UK, are having to deal with higher infection rates. Important drivers for the development of our exports will therefore fail to be engaged in the coming months.
Income prospects falling
Fading economic optimism has not left the income prospects of consumers in October untouched either. The income expectation indicator loses 6.3 points, falling to 9.8. It is, therefore, a good 29 points behind its value the same time last year.
For example, increasing infection rates are pushing back the opening up of the economy in the hospitality and tourism industries even further. Workers from these sectors will be spending a lot longer on the furlough scheme than previously hoped. A number of companies from these and other areas of the services industry are also threatening to become insolvent in the coming weeks and months. This would lead to increasing unemployment and would put a strain on the growth of private household income. The German government is attempting to combat this trend with a comprehensive financial package for companies and households.
Mild losses in propensity to buy
The propensity to buy underwent a decline in the wake of a fall in the economic outlook. However, with a reduction of 1.4 points, these losses are significantly less. Currently, the indicator remains at a very satisfactory level at 37.0 points. It is therefore just 15 points behind the same period last year.
If concerns over job losses increase in the future as a result of the pandemic, consumers will be more careful when it comes to their purchases, which will put a strain on the consumer climate.