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GfK: Romanians expect an income rise to boost domestic spending

Romanians spend only for everyday needs goods and the consumption trend is decreasing, as the propensity to spend is low, reveals a GfK study.

2015-11-11 16:54:07 - by Bogdan Tudorache

The new figures might also mean a possibly lower economic growth, triggered by the lack of demand, with a downward pricing pressure. The fight with the deflation may therefore be tougher than expected for the central bank in Bucharest, which initially estimated it would last until the first quarter of 2016.

Developments in Greece, the crises and wars in the Near and Middle East and refugee problems have influenced consumer mood in Europe in the third quarter. The Consumer Climate EU28 has dropped a half point to 10.3 points since June, states GfK's Consumer Climate Europe study in 15 European countries, according to a release received by Outsourcing Today.

"Last year, the Romanian economy grew significantly. In the second quarter of 2015, the gross domestic product was 3.3 percent higher than at the same time in the previous year. Although economic expectation in the third quarter declined by 2.8 points to their current level of 18.5 points, compared with the same month last year, there has been a significant increase of nearly 15 points," the study reveals.

The growing economy also has a positive effect on citizens' income expectations. In September, the related indicator was up by only 2.8 points at 21.3 points compared with June. Within comparison to the same month last year, however, the increase is of a respectable 16 points.

"Nonetheless, incomes usually suffice only to pay for everyday necessities. As a result, the willingness to spend in Romania is low. At -6.4 points, this continues to lie in the negative range, although an increase of 5.1 points was measured in comparison with June."

Findings of the GfK Consumer Climate Europe for the third quarter of 2015

In the summer, a variety of topics occupied the minds of the people and media in Europe. In the beginning, they included the new aid package and the new elections in Greece. When hundreds of thousands of refugees started pouring in – mostly from Syria – the reasons behind their flight gained more and more coverage.

Thus, in mid- and late summer, the crises and wars in the Near and Middle East were increasingly on the minds of Europeans. How can the refugees be distributed fairly among the European countries? How can they be integrated into society as quickly as possible? These questions dominated reporting in the media. Soon, the logistics and care of the refugees on their way through Europe became a major topic. In Germany, for example, many experts and consumers now assume that unemployment will rise next spring, when accepted refugees will flood the German labor market. It remains to be seen how much the integration of refugees in individual countries will have economic consequences and thus affect consumer mood.

All in all, the situation in the countries covered by the study varies greatly. In some countries, it was more the psychological factors, such as the crises with which they were increasingly preoccupied, that triggered a certain economic skepticism. In many cases, citizens' assessments of economic and income expectations as well as the propensity to buy was more negative than the domestic framework numbers would lead one to expect. However in other countries, facts such as economic growth and unemployment remained in the foreground, and thus were responsible for impacting individual indicators. Since June, Consumer Climate EU28 has dropped a half point, to 10.3 in September. In August the indicator even slipped to 9 points.

Propensity to buy declines in Bulgaria

In Bulgaria, economic development remains positive, but at -7.4 points, the index is still in the negative range. Nonetheless, economic expectations rose by 5.5 points compared with the second quarter. The increase appears even more significant considering the same month last year. For this period an increase of nearly 18 points has been measured.

Positive development can also be measured with regard to income expectations. Though still high, unemployment has stabilized. Bulgarians therefore expect compensation and salaries to remain stable. Compared with June, the indicator has increased by 5.9 points to -0.7 points. Compared with September 2014, this is an increase of nearly 18 points.

Nonetheless, the propensity to buy declined by 5.1 points in the third quarter. Income for many Bulgarians continues to just cover basic needs. For a large part of the population, major purchases are not affordable.

Poland: Consumer mood darkens despite strong economic numbers

Although Poland's economy grew significantly in the first two quarters, consumers' economic optimism lessened somewhat in the third quarter. The corresponding indicator dropped 3.5 points between June and September, ending at 15.7 points. In comparison with the same month last year, however, there was a plus of more than 10 points.

Income expectations, down 9.1 points, declined significantly in the third quarter. In September, the indicator was down to 7.1 points. Exactly a year ago, at 0.3 points, it was barely above the long-term average value of 0 points.

Polish consumers' willingness to buy declined drastically over the summer months and was at -8.8 points in September. That is nearly 18 points less than in June. The last time the indicator was lower was in August of last year.

Czechs expect a strong rise in incomes

The Czech economy is soaring. The gross domestic product in the first two quarters of this year grew by 4.1 and 4.6 percent respectively in comparison with last year. Even though economic expectations have fallen by almost 8 points since June, consumers evidently assume that the economy will continue to develop well. In September, the indicator was at 23.4 points.
Due to positive economic development, unemployment is very low. In August it stood at 5 percent. Consumers expect rising incomes in the coming months. The corresponding indicator in September was 38.4 points. This was 3 points less than in June. A year ago it was still at 25 points. 7
The propensity to buy cannot quite keep up with this development, with the indicator standing at 8.5 points in September. That is 3.6 points more than in June. After the long economic crisis, the majority of Czechs still cannot afford to spend money on luxury products and services after covering daily necessities.

Slovakia: Propensity to buy fluctuates in third quarter

Despite good economic numbers, Slovakian consumers are still somewhat skeptical about economic expectations. In December, at 12.2 points, the indicator was just 2.5 points higher than in June. In comparison with the same month last year, it even showed a decline of over 3 points.
Income expectations, stable over the summer, were at 19.6 points in September. That is nearly the same value as in June of this year and in September of last year.

On the other hand, the propensity to buy fluctuated greatly in the summer months. In September, at 2.2 points, it was again barely over its long-term average of 0 points. In August, however, it plunged to -10.1 points, the lowest value since June 2013.

Germans fear weaker economy

German economic expectations are on the decline. In September, the indicator fell for the fourth time in a row and has lost a total of 18.5 points since June.

With a value of 6.4 points, the economic indicator in September was higher than the previous year's level of 4.4 points by a fraction.
German consumers also assessed their income prospects less optimistically than in June. Over the summer months, the indicator sank by 9.5 points to the current 47.7.

Nonetheless, income expectations continue to be at an extremely high level. And it is still 4.3 points higher than last year.
The propensity to buy was also affected by the darkening of economic prospects. In the third quarter, the indicator lost 6.6 points and dropped back to 50.4. In comparison with last year, the indicator is still up 7.9 points.

France: Propensity to buy at highest level in almost 14 years

French economic expectations once again stabilized over the summer. In September, the indicator was at 6.1 points. That is 0.6 more than in June. Thus the French expect their economic power to remain constant or increase slightly. A year ago – in September 2014 – the indicator was nearly 33 points lower.

Although to date French consumers still do not expect significantly rising incomes, the related indicator still rose markedly in the third quarter. It increased by 16.6 points to 7.1 in September. A year ago, the income expectation was still at -36.4 points.

A similarly positive development may also be seen in the propensity to buy. In September it was at 8.7 points, and thus nearly 7 points higher than in June. The indicator thus reached the highest value since December 2001. At that time it was 17.2 points.

Great Britain: Economic expectation decline

The British evidently assume that their country's economy will not grow as strongly in coming months as it did in the last. In the third quarter, economic expectations dropped by 8.5 points to 11.2. That is the lowest value since July 2013. A year ago, the indicator was still at 24.6 points.
British consumers' income expectations, on the other hand, have remained stable. After slight fluctuations in the summer months, in 3 September the indicator lay at 11.9 points - exactly the same value as in June –. In comparison with the same month last year, it has risen by slightly more than 10 points.

In comparison with June, the propensity to buy also remained constant. In September at 15.2 points it was only 0.6 points above the value of the previous quarter, although in August the indicator reached the highest value since October 2003 at 18.2 points. It must thus be assumed that British consumers are currently spending more money for high-value products and services than in the last months and years.

Italians do not believe in further economic upswing

The economic expectations of the Italian consumers fluctuated greatly in the summer months. In June, the value was -20.2 points and it bottomed out at -31.9 points in July. Since then, it has recovered. At -15.4 points in September, however, the indicator was still clearly in the negative range. Consumers obviously do not expect that the slight economic growth of past months will last much longer.

Nor do the Italians believe that their incomes will improve in the coming months. With a current indicator value of -5.2 points, rather, they assume a further slight deterioration. In June, the value was at -4.5 points, while a year ago, in September 2014 it was 14.5 points.

Over the summer, the Italian consumer spending indicator stabilized in the positive range. At 6.9 points in September, it was 1.3 points higher than in June. In August, the propensity to buy even reached the highest value since August 2000 at 6.9 points.

Spanish consumers continue to expect stable economy

Spanish consumers continue to assume increased economic growth in the coming months. Even though economic expectations have fallen almost 4 points to 33.6 since June, the level continues to be particularly high. This consumer assessment is entirely supported by economic development. In the second quarter, the gross domestic product rose 3.2 percent above the previous year.

Based on the much improved and obviously stable economy, the Spanish continue to assume that incomes will rise. This may also have to do with the slowly but continuously improving employment situation. The corresponding indicator was 20 points in September. That is 2.5 points higher than in June. In comparison with this time last year, this is an increase of 15 points.

Nonetheless, the Spanish still have no money to spare for purchases that go beyond daily necessities. Though the propensity to buy rose more than 7 points in the third quarter, the indicator remains in the negative range at -5.3 points.

Portugal's income expectation rises despite high unemployment rate

Although Portugal's gross domestic product rose by 1.6 percent in comparison with the second quarter last year, consumers believe that economic developments have stalled. Measured from the June value, economic expectations have dropped by 1.4 points. However, at 13.8 points, the indicator clearly remains in the positive range.

Although unemployment – currently at 12.4 percent – remains very high and has not recovered in the summer months, income expectation since June has increased by 5.8 points to 6.7. That is the highest value since March 2000. Compared with the same month a year ago, the increase is actually around 17 points.

Portuguese consumers' propensity to buy remains very low. Even though a slight increase of 3.2 points was measured in comparison with June, the indicator still remains at a low of -20.8 points. Many consumers still cannot consider high-value purchases or services that go beyond daily necessities.

Dutch consumers continue to hold onto their money

The economy in the Netherlands has recently improved. However, economic expectation in the last three months dropped by 8.6 points to 20.8 in September. But the level of the indicator is still quite good. Consumers thus expect significant economic growth in the coming months as well.
Economic expectations have continuously improved since last spring. Although in September the indicator, at 0.7 points, was just barely above its long-term average value of 0 points, this was an increase of 6.9 points in comparison with June, and a rise of nearly 10 points since September of last year. Despite this rise, consumers still do not expect tangibly higher incomes in the coming months.
Accordingly, the majority of Dutch consumers are still unwilling or unable to spend money on high-value products or services that go beyond daily necessities. The propensity to buy was at 8.7 points at the end of the third quarter.

In June, the indicator was lower than this at 6.8 points. However, in comparison to the same month last year, there was an increase of more than 15 points.

Economic expectations sharply down in Belgium

Despite stable economic data, Belgians consumers' economic expectations dropped sharply in the third quarter and have declined by around 22 points to -3.6 points. This is the lowest value since June 2013.

The pessimistic assessment regarding further economic development also influenced income expectation. In the third quarter, the indicator declined by 9.8 points to -22.9 points. A year ago in September 2014, the value was -7.7 points.

This also affected the propensity to buy. The indicator fell by 6.5 points to 2.0 points, and is just barely above its long-term average of 0 points.

Greece's economic expectation declines dramatically

The continuing difficult economic and political situation in Greece is strongly affecting consumers' economic expectations. From June to September, the indicator dropped more than 20 points to -30. This is roughly 20 points lower than the same month a year ago.

The significantly lower economic expectations are also reflected in the income expectations of the Greek population. In the third quarter, the relevant indicator dropped by nearly 21 points to -33.5. Obviously, consumers expect further drastic financial cuts based on new talks between the government and the EU. These include impending tax payments, such as outstanding real estate taxes, which affect 70 percent of the Greek people.

Consequently, Greek consumers' propensity to buy has strongly declined. Whereas in June it was still at -17.5 points, in September it had fallen to -37.0 points. The citizens seem to consider themselves lucky if they can cover the daily living expenses with their money. It is anticipated that they will not be able to afford outlays for high-value products or services for some time.

Austria: Sluggish economy, but consumer appetite grows

The Austrian economy has not been able to gain traction. Consumers appear not to expect an improvement in the economic numbers in the coming months.
Accordingly, economic expectations in September at -19.8 points were nearly at the same value as in June (-19.9 points).

In contrast, income expectations grew in September, and at 31.1 points were at their highest value since October 1999 (32.7 points). In comparison with June, that is an increase of more than 13 points. A year ago, the indicator was still at 1.5 points.

In the wake of the optimistic income expectations, more Austrians again have the desire to consume luxury products and services. The propensity to buy has recovered since June. In September, the value was 11.1 points, 6.3 points higher than three months ago. In August it even rose to 19 points for a while.


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