Buying appetite increases at the end of the year

Consumers - Buying appetite increases at the end of the year

Germans' buying mood improved significantly at the end of the year - but experts are pouring water on the wine again for the coming months. According to the Ifo economic research institute, the decline in inflation is likely to come to a halt. The proportion of companies in Germany that want to raise their prices in the coming months is increasing again, according to the Munich-based researchers.

According to a consumer survey conducted by the market research company GfK and the Nuremberg Institute NIM, both income expectations and the propensity to make major purchases improved noticeably at the turn of the year. In their forecast for January, the two institutes put the consumer climate at -25.1 points. This represents an increase of 2.5 points compared to the previous month. However, the consumer climate before the pandemic was around +10 points.

The experts expressed concerns about future developments. "It remains to be seen whether the current increase is the start of a sustained recovery in consumer sentiment," said NIM expert Rolf Bürkl. "Consumers are still very worried." Geopolitical crises and wars, sharply rising food prices and discussions about the federal budget are causing uncertainty. "As a result, the level of consumer confidence is currently still extremely low."

Less money for consumption

These concerns are supported by a survey conducted by the consulting firm AlixPartners. According to the survey, around 35% of Germans intend to spend less money on consumption in the coming year. This applies to spending on everyday products such as food, but also to areas such as electronics, leisure and DIY products as well as entertainment and gastronomy.

The consultants surveyed 10,000 consumers in seven countries in October and November, including 2,000 in Germany. The most important pillar of the slight improvement at the end of the year was income expectations. People could hope for higher wages and salaries.

At the same time, prices are also rising. Ifo price expectations rose to 19.7 points in December from 18.1 points in November. The experts expect more price increases in consumer-related service sectors. "Restaurateurs in particular want to increase prices noticeably," the institute said. The return to the normal VAT rate for food on January 1 is likely to play a role here. However, retailers are also increasingly planning price increases.

Lower energy prices had pushed the inflation rate in November to its lowest level since June 2021. Consumer prices were 3.2% higher than in the same month last year. According to many economists, the inflation rate is likely to rise to around 4 percent in December. Last year, the state covered the costs of the December discount for gas and district heating customers on a one-off basis. This effect no longer applies this year.

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1. Despite the improvement in buying mood at the end of the year, experts are concerned about future inflation and price increases, particularly in the consumer-related service sectors.
2. According to a survey by AlixPartners, around 35% of Germans plan to spend less on consumption in the coming year, due to concerns about their economic situation and income.
3. In their analysis, the market research company GfK and the Nuremberg Institute NIM found that income expectations and the propensity to make major purchases improved significantly at the turn of the year, but the overall consumer climate remains low.
4. Rolf Bürkl, a NIM expert, expressed concern that the current increase in buying sentiment might not be the start of a sustained recovery, as consumers are still worried about geopolitical crises and rising food prices.
5. The Ifo economic research institute noted that the decline in inflation is likely to halt, and the proportion of companies in Germany that want to raise their prices in the coming months is increasing again.
6. Wine consumption in Germany could be influenced by both the declining inflation rate and the rise in prices, as many restaurateurs and retailers are planning price increases, including for food and district heating.
7. Although lower energy prices helped push the inflation rate down to its lowest level since June 2021 in November, many economists predict that it will rise again to around 4% in December as the one-time cost cover for the December discount for gas and district heating customers no longer applies.

Source: www.stern.de