Germany: Consumer confidence expected to be stable in March
February 26, 2019
Consumer sentiment is expected to be stable at February’s 10.8 in March according to the GfK Group Consumer Climate index. As a result, consumer confidence in the first quarter of this year has remained elevated and bodes well for private consumption growth in the quarter amid a more difficult external environment. However, the backward-looking indicators for February paint a more nuanced picture.
Economic expectations dropped markedly leading propensity to buy to moderate; however, income expectations rose fractionally. Economic expectations reached their lowest level in nearly three years after falling for the fifth month running in February. The downturn was driven by consumers’ outlook on the economy, which they fear might slip into a recession; the German economy narrowly avoided a technical recession in the fourth quarter of last year. Fears over a recession mainly stem from external events, as consumers worry that lingering global trade tensions will hurt the German economy, which is strongly export-focused, if downside risks materialize. Brexit also continues to cloud the outlook. Propensity to buy consequently eased in February, but nonetheless remained at a healthy level. Due to still-low interest rates, saving is an unattractive alternative and, coupled wage growth resulting from a tight labor market, this ensures German consumers are willing to part ways with their money. The labor market situation is also supporting income expectations as employment continues to rise and unemployment continues to drop, which is resulting in wage growth in nominal and real terms.
Looking at 2019 as a whole, GfK noted that “in order for consumption to be a reliable prop for the German economy in 2019, the current uncertainty with regard to the economy as a whole must not spill over onto labor market prospects. If employees get the impression during the course of the year that their jobs are no longer secure, this would have a direct negative effect on the consumer mood.”
Germany Private Consumption Forecast
FocusEconomics Consensus Forecast panelists expect private consumption to expand 1.4% in 2019, which is down 0.1 percentage points from last month’s estimate. For 2020, panelists see private consumption growing 1.6%.
Author: Jan Lammersen, Economist