German GFK Consumer Confidence January 2008

German consumer confidence unexpectedly rebounded ever so slightly from what had been the lowest level in almost two years at the end of December as shoppers appear to have become slighly more willing to spend as the holiday season approaches. GfK AG's index for January, based on a survey of about 2,000 people, rose to 4.5 from a revised 4.4 in December, the Nuremberg-based market-research company said in a statement at the end of last week.This "snippet" of news lead to all sorts of speculation in the financial and business press, but I think we need to be very careful indeed here. There is such a thing as clutching at straws, and we all have a tendency to see what we want to see, to emphasise the good news, and play down the bad, to hold to what conforms to how we see the world and to discard the world. I do it, you do it, and of course the financial and business media do it bigtime.

So if you come to look at the chart below, what stands out is not the difference between December and January, but how similar they are with each other when compared with, say, October or September. Consumer confidence in Germany is plumming the lows, and at the moment it is staying there. Of course some sort of rebound is only to be expected after the beating which German domestic consumption has taken across 2007. Again let's look at the chart:





2007 has been a baaad year, and there's no mystery about why. VAT was raised by 3 percentage points on the 1st January, giving the German consumer a hefty hit where it hurts, in the pocket. So clearly, after things being so bad, they have to get just a little better (or at least so the theory would go, and here's hoping). All I would say is that on the Gfk reading it is way to soon to start declaring that this slight rebound has taken happened (don't hold out hope for a massive recovery, look at the longer term trend). And this situation is only confirmed when we come to look at the index sub components.




The indicator measuring households' willingness to spend rose to minus 10.7 from minus 21.8 in the previous month, indicating a slight improvement in the climate as we entered the xmas season, but there is little remarkable in that, indeed it would have been remarkable if things had not recovered slightly. On the other hand consumers income expectations fell to minus 1.7 from zero and shoppers also became less optimistic about the general economic outlook, with this indicator declining to 23.6 from 24.1.

According to Klaus Wuebbenhorst, chief executive officer at GfK, today's report is "good news, giving reason for optimism for 2008"...."Consumers are more willing to buy more expensive products, which is good news for Christmas sales." Well, as I say, there are opinions here to suit all tastes, so from here on in its up to you to make up your own mind what the reading actually means.