Press release. Consumer mood brightened again towards end of year. Findings of the GfK Consumer Climate Europe study for the fourth quarter of 2014

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1 Press release February 4, 2015 Rolf Bürkl T rolf.buerkl@gfk.com Ursula Fleischmann Corporate Communications T ursula.fleischmann@gfk.com Consumer mood brightened again towards end of year Findings of the GfK Consumer Climate Europe study for the fourth quarter of 2014 Nuremberg, February 4, 2015 The mood of consumers throughout Europe improved again over the fourth quarter of the year. The indicators for economic and income expectations, as well as willingness to buy, rose towards the end of the year in almost all countries of the European Union (EU). The consumer climate for the EU 28 also improved by 1.3 points in the final quarter, closing the year at 5.5 points. These are the findings of the GfK Consumer Climate Europe study in 14 European countries. Looking at economic development of EU countries and the consumer mood in 2014, the year can be divided into two distinct parts. In the first half of the year, the economies of virtually all European countries were developing positively. Consumers were clearly becoming ever more confident that the financial and economic crisis would finally be behind them in the following months. Between April and June, the indicators for economic and income expectations as well as willingness to buy reached record highs almost across the board. The consumer climate index for the EU 28 was at 9.1 points in June, which is the highest value since April GfK SE Nordwestring Nuremberg Germany T Management Board: Matthias Hartmann (CEO) Christian Diedrich (CFO) Dr. Gerhard Hausruckinger Debra A. Pruent Chairman of the Supervisory Board: Dr. Arno Mahlert However, in summer and autumn, uncertainty began to increase not only among consumers, but also in the economy. This is attributable to a number of different reasons. The conflict in Ukraine reached its peak. Comments from Russian President Vladimir Putin caused uncertainty, for the most part in Eastern European countries. In the Middle East, the ongoing conflict between Israel and Palestine and the advancement of the Islamic State militant group gripped the world. In addition, the Ebola epidemic shifted global attention to West Africa. As the first patients were flown to Europe and the USA for treatment, fears that the virus would spread increased. With regard to the economic situation, the framework conditions also deteriorated. In many countries, gross domestic product (GDP) growth has been much slower than had been predicted. Meanwhile, some countries even recorded a decrease. This was further affected by an extremely low level of inflation. In particular, Southern European countries such as Spain battled against deflation. There was also a risk of negative price development for the EU as a whole. The inflation rate for the EU 28 was -0.1 percent in December, while the rate in the eurozone was even lower at -0.2 percent. This is primarily due to the collapse in energy prices. Commercial register Nuremberg HRB

2 These events are all contributing towards a clear increase in anxiety among European consumers. The indicator values all fell towards the end of the summer and in autumn, in some cases quite markedly. However, in the fourth quarter, a sense of optimism once more took hold in most countries. Although many indicators remain below zero, they are on an upward trend in virtually all countries. Nonetheless, there continue to be risks that may hamper positive economic development over the coming months. Following the election in Greece, it now remains to be seen what economic course the next government will take and whether it will keep to agreements with other European countries and the European Commission. This development is also reflected in the GfK consumer climate for the EU 28. Within the context of the optimistic mood in all EU countries, the index climbed to 9.1 points in June, which is the highest value since April In September, it dropped down to 4.2 points. By the end of the year the indicator had recovered slightly to 5.5 points in December. Germany: economic expectations recover at year-end There was considerable fluctuation in the economic expectations of German consumers throughout The upward trend which had been sustained since mid-2012 continued for the first half of the year. The indicator peaked at 46.2 points in June, before plummeting by around 35 points in August. At 1.6 points in November, it dropped to the lowest value since June However, Germans started to have a more positive outlook towards the end of the year. They are expecting economic performance to improve again over the coming months. The indicator was at 14.5 points in December. Income expectations were also very up and down over the last year, albeit maintaining a high level. The indicator was at 39.5 points in December 2013 and at 41.0 points exactly one year on. An interim peak of 54.7 points was reached in July This was the highest value since 1991, when the mood of consumers in a reunified Germany was recorded for the first time. Germans' willingness to buy remained virtually stable in The indicator was at 46.1 points in December However, it only increased slightly across the year as a whole, to 49.1 points by December The indicator peaked at 55.5 points in March, which is the highest value since December Germans' positive buying mood has made a key contribution to the economic growth of 1.5 percent last year. France: consumers expect ongoing economic difficulties The economic expectations of French consumers recovered slightly in the first quarter of At -5.8 points in April, the indicator climbed to the highest value since March However, it fell again over the course of 2

3 the year, dropping to its lowest value of points in September. Economic expectations recovered again somewhat in the final quarter of the year. By December, the indicator had improved to points. Unemployment continues to be high in France. The economy is struggling to gain momentum. In view of this, French consumers still assumed that incomes would decrease last year, although pessimism has now fallen slightly. Over the year as a whole, income expectations were on an upward trend. In April, the indicator once again plummeted to points, but steadily recovered thereafter. At the end of the year, it once again increased considerably by almost 10 points, to points in December. Willingness to buy also developed positively in France. In December 2013, the indicator was still at points, but by December 2014 it had improved to points. The peak for the year was reached in November, at points, which is the highest value since June However, against a background of weaker income expectations, French consumers still do not have any money left over for making larger purchases. United Kingdom: good economy is not impacting buying mood In the first half of 2014, British consumers were extremely optimistic, expecting economic data to improve significantly over the coming months. In June, this indicator climbed to 37.9 points, which is the highest value since June However, optimism waned over the second half of the year. However, at 22.8 points, the value in December 2014 was still far above the long-term average of zero points. British consumers were considerably more restrained with regard to their income expectations last year. In December 2013, the indicator was at -6.3 points. By April 2014, it had reached its high for the year of 15.6 points. At that time, consumers had therefore still been expecting their incomes to rise slightly over the next few months. Over the course of the year this optimism declined again, falling to the lowest level for the year, of 1.5 points in September. In December 2014, the indicator was at 5.1 points. The sound economic situation in the UK has had little impact on the spending mood of consumers. Although the indicator recovered quite substantially as 2014 progressed, it was at just points in December However, a positive value was only reached in August 2014, with 0.1 points. By the end of the year, the indicator was again below zero, at -2.7 points. Italy: hopes of economic recovery not fulfilled In the first half of 2014, Italian consumers once again had hopes that their economy would gradually begin to recover. Accordingly, economic expectations rose significantly. While the indicator was at points in December 2013, by May 2014 it had climbed to -6.8 points, which is the 3

4 highest value since April However, consumers' economic optimism disappeared when the promising economic predictions were not fulfilled and Italy reported a declines in GDP in the second and third quarters. By the end of the year, economic expectations had fallen to points. Income expectations saw similar development. In December 2013, the indicator was still at points, but by May 2014 it had recovered to 4 points, which was its highest value since August The indicator subsequently fell again sharply. At points in December 2014, it was only slightly up year-on-year. It therefore comes as no surprise that the buying mood of Italians followed a similar course. It increased from points in December 2013 to -6.4 points in September This is the highest value since May However, the indicator fell again towards the end of the year, to points. Spain: economic expectations flying high Over the past year, Spanish consumers had hopes that their national economy would recover. Economic expectations climbed to 7 points in December 2013, which is the highest value since January By August 2014, the indicator had improved to 31.1 points, the peak value since March 2000 (31.3 points). Although it dropped a few points towards the end of the year, the indicator was still at a very good level of 24.8 points in December. In the wake of a recovering economy, Spanish consumers are now slowly beginning to expect incomes to rise. This hope is first and foremost based on the fact that unemployment is continuing to decline, which means ever more people are earning a living. The indicator peaked at 9.5 points for the year, after falling as low as points in December In November, income expectations once again fell to -4.6 points, but recovered to 5.9 points by December. However, willingness to buy has, as yet, not benefitted from this cautious optimism, as the trend of this indicator always lags some way behind. Spanish consumers are still some way off from having money for making major purchases. They must first be able to again cover their everyday needs without any difficulties. The lowest indicator value of points was recorded in February last year, while the high of -4.4 points was in June. At year-end, the indicator was at points. Greece: consumer sentiment on upward trend overall Greek consumers have taken a considerably more optimistic view of the developments in the economic situation over the past year. The corresponding indicator increased from points in January 2014 to points in June, which is the highest value since December

5 Economic expectations declined again slightly over the second half of the year, but, at points in December, they were still clearly up on the figure at the start of the year. This is also a reflection of the positive economic development. Over the past year, the economy recorded growth for the first time since Although unemployment is still extremely high at its current rate of 25.8 percent, it is on a downward trend. Accordingly, the values of income expectations over the past year are still quite significantly below the longterm average of zero points. Nonetheless, the indicator did improve from its low of points in February to a high of points in June. In the months that followed, the value dropped again slightly to points in December. Despite willingness to buy being a lagging indicator, the mood of Greek consumers was also boosted by the promising economic data in the first half of the year. This indicator increased from points in January to points in July. Over the second half of 2014 this optimism progressively dwindled away. By December, willingness to buy had plummeted to points and was therefore virtually on a par with the previous year's value. Portugal: confidence in economic upswing In 2014, the Portuguese economy recorded considerable growth again for the first time since This is also reflected in the development of the consumer mood. Economic expectations continued to improve, from points in December 2013 to 16.0 points in November This is the highest value since March 2000 (16.1 points). Portuguese consumers are evidently assuming that the country has moved past the economic and financial crisis. This also benefited income expectations. After points in January 2014, the indicator had risen to 4.7 points by October, which is the highest level since January In view of favorable economic developments, consumers appear confident that the situation on the labor markets will continue to improve over the coming months in that the level of unemployment will decrease. By year-end the indicator had dipped slightly to 2.6 points. In line with expectations, willingness to buy has not yet benefited from the improved economic and income expectations. Following the long economic crisis, it will still be some time before Portuguese consumers are in the position of having money for major purchases. They must first be able to again cover their everyday needs without any difficulties. The task now is to stabilize economic growth and boost the labor market. Before willingness to buy can return to positive figures, unemployment must fall significantly in tandem with substantial increases in wages and salaries. In December 2013, the indicator was at points, while it stood at points exactly 5

6 one year later. Austria: poor mood despite high employment The mood of consumers in Austria has deteriorated considerably over the past year. Economic expectations were last above the long-term average of zero in January 2014, when the indicator as at 4.8 points. The lowest value of points for the year was recorded in September. At year-end, the indicator had recovered slightly to points. Although unemployment in Austria is extremely low, income expectations fluctuated considerably. In December 2013, the indicator was at 6.0 points. An interim peak of 10.0 points was reached in March, before dropping to points in May. By November, the indicator jumped up by more than 22 points to 30.2 points, before falling to 9.1 points in December. The spending mood of Austrian consumers was similarly changeable. Willingness to buy fluctuated considerably between the yearly low of 5.2 points in May and a high of 19.8 points in September. In December 2014, the indicator was at 15.8 points. Czech Republic: record value in income expectations The economy in the Czech Republic recorded considerable growth last year. This also had an impact on economic expectations. In December 2013, the indicator was at 8.6 points. By June, it had climbed to an interim peak of 35.9 points, after which it fell to 16.2 points in September. However, by the end of the year it was at 41.0 points, which is the highest value since the survey began in January The favorable economic development in the country has also caused Czech consumers to expect income increases. Income expectations were already at a good level of 22.5 points in December They remained virtually unchanged until September. In the last quarter of the year, the indicator rose to 51.3 points, which is again a record high. Willingness to buy was not able to echo this positive trend. Although the indicator recovered slightly, at -6.7 points in December, the value remained negative. However, overall it improved by around 20 points over the course of the year. Poland: good economic data, but poor mood Over the past year, Polish consumers' confidence in the economic development of their country varied considerably, despite the economic situation continuously improving. In the first half of the year, economic expectations increased with some fluctuation, rising from 1.0 points in December 2013 to 17.4 points by June However, the indicator then dropped considerably, before recovering slightly towards the end of the year. At 18.4 points in December, the indicator climbed to the highest value 6

7 since October The trend in income expectations was virtually identical. By June 2014, the indicator had increased to 22.6 points, which is the highest value since March Consumers' expectations of increasing incomes then declined to 0.3 points in September, despite the rate of unemployment falling at the same time. By December, the mood of Polish consumers had recovered again somewhat, with the indicator at 18.6 points. The spending mood in Poland was also rather inconsistent under the influence of the other two indicators. In part, the fluctuations were even more pronounced. The lowest value of points was recorded in February, while the high of 15.9 points was reached in May. In August, willingness to buy had once again fallen to points, before rising back up to 11.3 points in December with some intermittent dips. Netherlands: skepticism remains despite good economic development As is the case in many other European countries, economic expectations in the Netherlands also increased in the first few months of last year. The indicator was at its highest in June, when it reached 34.1 points. A better value was last recorded in January Over the course of the year, the consumer mood dropped again. The lowest value for the year of 15.7 points was recorded in November. In December, the indicator was at 18.7 points. The economy in the Netherlands has seen growth, while unemployment has been low. Nonetheless, Dutch consumers were noticeably more pessimistic in their outlook on income for The indicator started the year at points in January, but it rose to the highest level since March 2010 in May, at -3.2 points. By December, it had fallen to points again. In contrast, the development of the buying mood in the Netherlands was positive across the board. At points in December 2013, willingness to buy had been well below the long-term average of zero points. However, the positive upward trend is unmistakable. At -2.6 points in December 2014, a higher value was last recorded for willingness to buy in April If this development continues, it is probable that the Dutch economy will benefit from consumers spending more on larger items. Slovakia: considerable improvement in consumer mood over the course of the year In January 2014, economic expectations in Slovakia climbed to 25.4 points, which is the highest value since September However, the indicator immediately plummeted to the lowest value for 2014 in February, at 12.5 points. It only returned to an upward trend in October. By December, it had 7

8 climbed to 29.9 points. A greater value was last recorded in January The strong economic growth last year indicates that the positive sentiment of consumers will continue in Income expectations fluctuated in Slovakia last year, albeit remaining at a good level. Consumers were confident of rising incomes throughout the whole year. The indicator started 2014 at 26.5 points in January. By December, the indicator had risen to 32.6 points, which is its highest value since July A similar trend to income expectations was apparent for willingness to buy. However, the variations were much greater. Over 2014 as a whole, the willingness to buy of Slovakian consumers increased significantly. In January, the indicator was at 4.4 points. By December, it had risen to 30.1 points. Bulgaria: poor mood despite good economic data The good economic development of the last year has had very little impact on the mood of consumers. In the first months of 2014, economic expectations increased in line with the good economic data, rising from points in January to 1.4 points in April. This is the highest value since February From June, Bulgarian consumers were considerably less optimistic about the outlook for positive economic developments. In October, the indicator was only at points. It closed the year at points. Income expectations mirrored this development. The indicator rose from points in January to 12.7 points by April. A higher value was last recorded in September The year-low of points was also reached in October. Even the gradual decline in the unemployment rate was not able to reverse this trend. A similar picture emerges for willingness to buy. The highest value was recorded in April (21.7 points) while the lowest was in September (-2.5 points). However, the indicator was almost continuously above zero. Despite the negative assessment of both the economic and their own financial situation, Bulgarian consumers were remarkably prepared to invest in major purchases. Romania: consumers finally swayed by continuously good economic data The Romanian economy recorded strong growth over the past year. However, it took some time for consumers to feel confident in the upswing. Accordingly, economic expectations fluctuated between -17 points and -10 points over the first half of In the second half-year, the belief in a sustained upturn gradually strengthened. By December, doubts appeared to have dwindled and the indicator jumped from 9.3 points to 17.7 points. 8

9 Romanian consumers were much quicker to develop faith that their own income prospects would improve. Income expectations increased from -8.9 points in December 2013 to -0.7 points by June. Over the second half of the year, the indicator significantly consolidated its position at well above zero. In December, the indicator was at 15.7 points, and therefore climbed to its highest value since October However, this has not yet had a major impact on willingness to buy. This remained below zero for the entire year. The lowest value of points was recorded in June, while the indicator peaked at -3.8 points in December. Although economic development is extremely positive and unemployment remains at a very low level of 6.5 percent, Romanian consumers need all their available income for everyday living expenses. So far there has been very little money left over for major purchases. Further information: Rolf Bürkl, , konsumklima@gfk.com About the study The findings of the GfK Consumer Climate Europe are taken from a consumer survey carried out in all countries of the European Union on behalf of the European Commission. Approximately 40,000 individuals, representing the adult population in the EU, are surveyed on a monthly basis in 28 countries. The GfK indicators of the Consumer Climate Europe are based on monthly surveys focusing on consumer sentiment. They deal with the general economic situation in the different countries and the situation of individual households. The questions on the GfK Consumer Climate Europe are asked on a monthly basis, primarily in an omnibus survey. This is a survey dealing with several issues, conducted either by telephone or in a face-to-face interview. From the monthly range of 12 questions overall, five questions that play a decisive role for the consumer climate are selected for the GfK Consumer Climate Europe. The selected five indicators economic expectations, price expectations, income expectations, willingness to buy and propensity to save are calculated as follows: Net totals are used as a basis for calculating the indicators. The share of consumers who gave a positive response (e.g. the financial situation of the household will improve (considerably)) is subtracted from the share of those who gave a negative response (e.g. the financial situation of the household will worsen (considerably)). In a further step, this net total is standardized using established statistical 9

10 methods and then converted so that the long-term average of the indicator is zero points and there is a theoretical value range of +100 to -100 points. However, on an empirical basis, values between +60 and -60 points have generally been realistic since If an indicator is positive, this shows that consumers assessment of this variable is above average in a long-term comparison, and vice versa for negative values. Standardization makes it easier to compare the indicators of different countries, as variations in response behavior resulting from different mentalities are offset, while the fundamental trend of the indicator remains unchanged. About GfK GfK is the trusted source of relevant market and consumer information that enables its clients to make smarter decisions. More than 13,000 market research experts combine their passion with GfK s long-standing data science experience. This allows GfK to deliver vital global insights matched with local market intelligence from more than 100 countries. By using innovative technologies and data sciences, GfK turns big data into smart data, enabling its clients to improve their competitive edge and enrich consumers experiences and choices. For more information, please visit or follow GfK on Twitter: Responsible under press legislation: GfK SE, Corporate Communications Jan Saeger Nordwestring Nuremberg Germany T public.relations@gfk.com 10