Consumer sentiment: less purchase, but more credit

Consumers in Germany are planning less purchases of durable consumer goods, but want to use more loans overall. The persistent euro crisis and the economic climate that is also set in Germany are depressing the mood, without showing too gloomy clouds in the consumption sky.

As part of its autumn forecast, the banking association presented the consumer credit index. The index is determined twice a year by the Consumer Research Society by surveying 1,500 households on the propensity to purchase and the planned borrowing. With an index value of 112, the index forecasts a constant demand for consumer finance over the next twelve months. An index value of 100 means that a stable development is imminent.

Frequent credit for used cars?

Frequent credit for used cars?

Overall, however, the propensity to buy has declined somewhat. The partial index value for purchases reached only 91 points. The willingness to spend depends mainly on the type of consumer goods. The sub-index for renovations reached 110 points, that for holiday travel 120 points. Significantly fewer purchases are planned for furniture and electronics (70 points) and vehicles (63 points).

The sub-index for financing propensity reached 124 points, the highest level since the introduction of the index in the spring of 2011, when he started with 103 points. The banking industry interprets this as an indication that there is a greater affinity for consumers to finance purchases. The increase in the sub-index is mainly due to the greater financing propensity for used cars (143 points) and furniture and kitchens (131 points). In most other categories, the propensity to finance by credit remained constant, while it even fell on holiday trips (index value: 82 points).

Euro-dusk in the heads?

Euro-dusk in the heads?

The overall decline in the propensity to buy does not come as a surprise, as it is typical for an environment of growing economic uncertainty. The long-standing positive trend on the German labor market seems to be gradually reversing. Sooner or later, there must be some sort of decision in the euro crisis. All of this certainly contributes to the fact that many households are initially putting a stop to major purchases and awaiting further development.

The fact that those households that continue to plan purchases, increasingly want to finance them with loans, may be an indication of growing inflation expectations. However, this relationship should not be over-interpreted. In most cases, the reason for choosing a loan may be historically low interest rates. At best, a small minority should expect that the repayment of the loan will be facilitated by an inflationary development. Whether it comes to a widespread inflation and whether this occurs within the usual time frame for consumer financing, is ultimately highly uncertain.

Overcapacity: installment loan is financing dealer financing

Overcapacity: installment loan is financing dealer financing

The Banking Association emphasizes the important role of consumer credit for the economy: “Given the consumer spending crisis due to consumer crises, trade now relies on financing to continue selling goods,” said association chief Peter Wacket at the launch of the autumn report.

He particularly refers to point-of-sale financing. Dealers often use partial payments with low or no interest rates to promote sales. In the current market environment, however, recalculation, even at 0.0 percent interest, is particularly worthwhile. The slowdown in the global economy is leading to overcapacities that are forcing retailers (not just cars) to price reductions. Consumers can take advantage of the hour and negotiate attractive discounts. However, traders usually can not afford to use them if a PoS loan is used. Often a classic installment loan is therefore the cheaper option.