We at FMN have never discussed the “consumer climate” in Germany, which is regularly published by the “Gesellschaft für Konsumforschung” (GfK). It simply did not seem interesting enough to us until now. But here and now, when we all have to deal with the coronavirus crisis, it is worth taking a look. The GfK consumer climate index is created by a survey. The data published today is from the survey period March 4th to 16th, 2020. The coronavirus (COVID-19) has massive impact on consumer sentiment in Germany. Both economic and income expectations as well as the propensity to buy would have to accept heavy losses. Consequently, a value of 2.7 points is currently forecast for April. 5.6 points less than in March of this year (revised 8.3 points).
The value of 2.7 points is the lowest value since May 2009. At that time, the consumer climate during the financial and economic crisis was at 2.6 points, according to GfK. What about the propensity to consume among the public? Just think: this survey ran until March 16th. Had the survey gone on until last weekend, would the mood have been even dramatically worse? In four weeks, the consumer climate is likely to be much worse again if the crisis continues for a few more weeks.
GfK in words:
Just like economic and income expectations, the propensity to consume is also suffering drastic losses. The propensity to buy indicator lost 22.2 points, slipping to 31.4 points. The last time a lower value was seen was in June 2013 with 31.1 points. The decline of a good 22 points within one month can also be described as historic. One has to go back very far in the history of this indicator to see a comparable development.
In January 2007 a (significantly) higher decline was even measured in the wake of the VAT increase (-60.5 points). That is more than 13 years ago. In view of expected income losses, a value that is still well above the long-term average of zero points can be seen as a small ray of hope in the otherwise gloomy environment. However, it should be noted that the survey took place in the period from March 4th to March 16th, which means that the majority of respondents were not yet aware of business closures and production stops. A noticeable increase in the propensity to save was an additional burden on the consumer climate.
Hoarding causes increase
Some other interesting statements by GfK are printed here. For example on possible future changes in behavior after the end of this crisis:
At the end of February, however, the coronavirus (COVID-19) still caused a jump in sales in food retailing of +14 percent compared to the same month last year. This increase is mainly due to hoarding purchases in calendar week nine, in which sales in individual categories were up to 200 percent higher than in the same week last year. “This trend will continue in March and possibly in the following months.
In addition to hoarding, the ‘closure’ of public life is leading to a shift in out-of-home consumption to private apartments and houses and is increasing sales compared with the previous year”, says Dr. Robert Kecskes, GfK retail expert. In the medium and long term, food retailers will also have to adjust to the economically uncertain situation of consumers. He adds: “It can be assumed that a stronger sense of local solidarity will develop after the Corona crisis. On the other hand, many households will find themselves in precarious situations and will be dependent on public assistance. The food retail trade must also prepare itself for this.
Consumers fear recession
Consumers see very difficult economic times ahead for Germany. Economic expectations lost 20.4 points in March, slipping to -19.2 points. A lower value was last measured in August 2012 at -20.0 points. Compared to the previous year, the minus amounts to a good 27 points. As a result of the strong spread of the virus and the restrictions it has imposed, the German economy has put on the brakes within a very short time. Shut-down production and closed shops and restaurants have brought economic activity in many areas to a virtual standstill. The threat of considerable short-time work and rising unemployment figures are now having a full impact on consumer sentiment. Fear of job losses has risen sharply within a very short time.