06 Jul 2020

Households hardly consume any more due to a reduction in value-added tax

German Consumers are not planning any additional major purchases due to the reduction in VAT. In addition, only twelve percent are still expecting a second national lockdown.

These results are reflected in the current wave of surveys of the "Haushaltskrisenbarometer" (household crisis barometer), which is jointly carried out by the Leibniz Institute for Financial Research SAFE, Nielsen-Frankfurt, and the Chair of Finance and Economics at the Goethe University Frankfurt.

"The latest additional tax reduction as part of the German federal government's major economic stimulus package is having a negative impact on the vast majority of households," says Roman Inderst, Professor of Finance and Economics at the Goethe University Frankfurt. Thus, 89 percent of the approximately 7,500 households that participated in the wave of surveys for the Haushaltskrisenbarometer in June 2020 are not planning any major purchases above 250 euros as a result of the VAT cuts (with the purchase of automobiles being excluded from the question). Seven percent therefore want to spend earlier and only four percent want to spend more.

"Even with seven percent of households who are considering larger expenditures sooner than planned, the effect on the German economy is questionable," says Andreas Hackethal, director of the SAFE research department Household Finance. "In recent months, the vast majority of German households have experienced the phenomenon of 'forced saving'," Hackethal continues. The reason for this, according to the analyses, is that although these very households did not have to cope with a loss of income, they also had fewer opportunities for consumption compared to the time before the Corona crisis. At the same time, the income expectations of households as a whole have now improved significantly since the beginning of the crisis. Although since the first survey at the end of March there has been a share of up to 20 percent of households that suffer income losses as self-employed or as employees in short time.

The current analysis of the Haushaltskrisenbarometer further shows that fewer and fewer people are feeling insecure due to the spread of the corona virus. While this was still the case for half of the households in March 2020, it is now 31 percent. And only 38 percent still avoid the public. "The majority of households are also no longer afraid for their own health and are venturing into the public eye again," says Alexander Proske von Nielsen.

The survey results also show that only twelve percent of households expect nationwide closures as a result of a second wave of infection. However, a majority of 61 percent of people expect that there will again be regional restrictions on life and closures of shops and companies. As many as 23 percent of households continue to expect contact restrictions and the obligation to wear a face mask.

About the cooperation

The Haushaltskrisenbarometer (Household Crisis Barometer) is carried out by a cooperation between the Leibniz Institute for Financial Research SAFE, Nielsen-Frankfurt, and the Chair of Finance and Economics at the Goethe University Frankfurt. Currently, questions are asked to the households of the Nielsen Consumer Panel every four weeks. The high number of households continuously surveyed, the large number of answers (always more than 7,000 households), and the possibility of making the answers representative by means of statistical methods result in a reliable and timely picture of the economic situation, consumer behaviour and expectations of the entire population. The Nielsen Consumer Panel also allows survey results to be linked to actual purchasing behaviour for further analysis or comparison. In this way, it is possible to analyze how the income shocks surveyed are also reflected in the shopping basket of individual households.

All survey results can be found here (in German only)

Scientific contact

Prof. Dr. Andreas Hackethal
Director of the SAFE research department Household Finance
Email: hackethalwhatever@safe-frankfurt.de
Phone: +49 69 798 33700