The mood of consumers throughout Europe improved over the fourth quarter of the year, but British consumers are not seeing much impact on spending, according to the GfK Consumer Climate Europe study.
The results suggest that 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.
The report stated: “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 2008.”
However, in summer and autumn, uncertainty began to increase not only among consumers, but also in the economy, it adds. This is attributed to a number of different reasons including the conflict in Ukraine and comments from Russian President Vladimir Putin, the ongoing conflict between Israel and Palestine and the advancement of the Islamic State militant group. In many countries, gross domestic product (GDP) growth has been much slower than had been predicted, GfK adds. This was further affected by an extremely low level of inflation.
The report explains: “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% in December, while the rate in the eurozone was even lower at -0.2%. This is primarily due to the collapse in energy prices.”
These events are all contributing towards a clear increase in anxiety among European consumers, GfK adds. “The indicator values all fell towards the end of the summer and in autumn, in some cases quite markedly,” the report continues. “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.
“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 2008. 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.”
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, GfK reveals. In June, this indicator climbed to 37.9 points, which is the highest value since June 1997. But optimism waned over the second half of the year. Despite this, at 22.8 points, the value in December 2014 was still far above the long-term average of zero points.
However, GfK also warns that the sound economic situation in the UK has had little impact on the spending mood of consumers. The report adds: “Although the indicator recovered quite substantially as 2014 progressed, it was at just -27.5 points in December 2013. 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.”