German income hopes rise, but willingness to buy stands still
Germany's consumer-climate indicator improved to minus 26.6 points for September and income expectations reached a six-month high, yet willingness to buy was unchanged. Annual euro-area lending growth reached 4.4 per cent for companies and 3.1 per cent for households in July. Improving income confidence and credit flow sit beside flat spending appetite, suggesting the recovery has yet to reach households evenly.
Economics & Markets··Morning
Income hopes returned; spending appetite did not
Germany's consumer-climate indicator improved to minus 26.6 points for September after the August reading was revised to minus 29.4. Income expectations rose 16.2 points to 1.7 points, their highest level in six months. Economic expectations increased for a fourth consecutive month to minus 3.9 points. Willingness to buy, however, was virtually unchanged at minus 9.8 points and has hovered near minus 10 for about four years. Willingness to save slipped 1.5 points but remained high at 15.5, leaving the improvement in income hopes yet to pass into spending intentions.[2]
Credit flow accelerated in July
Annual growth in adjusted loans to euro-area non-financial companies accelerated to 4.4 per cent in July from 4 per cent. Household lending growth edged up to 3.1 per cent from 3 per cent, while growth in total private-sector lending reached 4.1 per cent from 3.8 per cent. Annual growth in broad money M3 rose to 3.4 per cent from 3.3 per cent, but growth in M1, which includes currency and overnight deposits, slowed to 3.1 per cent from 3.5 per cent. European Central Bank (ECB) data therefore show credit expanding for companies and households while the components of money growth move in different directions.[1]
Two thresholds for the improvement
Faster credit growth and stronger income expectations point to a shared improvement in financing conditions and household confidence, but the indicators measure different things. The European Central Bank reports annual changes in observed loan stocks. The NIM survey gathers subjective expectations from about 2,000 consumers and is not direct spending data. Willingness to buy remaining at minus 9.8 makes that distinction tangible. July lending and September consumer climate suggest some obstacles to European demand are easing; a conclusion that household consumption has actually accelerated requires subsequent spending data.[1], [2]
