European consumers are no longer as optimistic about the future as they were in June, according to a GfK consumer climate survey. Over the past three months, economic expectations have fallen in almost all countries in the survey, with quite substantial declines recorded in some areas. The upward trend for both income expectations and willingness to buy also appears to have come to an end in many countries.
The economic development in almost all European Union (EU) countries has been significantly lower than economic institutes and governments had predicted in spring, the report states. In some countries, economic performance has in fact begun to fall again.
Economic decline in Germany, weak foreign demand for imports, lessening consumer demand, structural problems, and political tensions such as those between Russia and the EU are all noted as having had a negative effect and contributing to uncertainty among consumers.
The low level of inflation is also a factor. In September, inflation was 0.3% across Europe. This is the lowest value in almost five years. A number of countries are already battling against deflation, which means consumer prices are falling.
European consumers share the view of businesses that the economy is no longer as stable as it was in early summer. In June, the GfK Consumer Climate indicator for all 28 countries in the EU climbed to 9.1 points, its highest value since April 2008. It has since fallen by almost five points. In September, the indicator was only at 4.2 points.
Although the UK economy is clearly growing, consumers are considerably less optimistic about the next few months than they had been in June, GfK says. Economic expectations have dropped by more than 13 points, but the indicator is still at a ‘very good’ level of 24.6 points. The Scottish referendum on independence which took place in September is one possible reason for this decline. However, Scotland voted to remain part of the UK and the general economic data is extremely good, meaning that a higher value is to be expected again in October, GfK adds.
British consumers are not confident that they will see an improvement in their income situation. The indicator dropped by 6.5 points over the summer and is at 1.5 points at present. This is the lowest value since December last year.
Only willingness to buy was able to record a slight increase, rising to -2.2 points. However, the negative value shows that UK consumers are still exercising great caution with regard to buying more expensive products. A positive value was recorded for the first time since August 2007 when it climbed to 0.1 points in August. In comparison with September 2013, the indicator has risen by around 21 points overall.