Germany: Consumer confidence expected to moderate at the close of the year
Consumer confidence is expected to ease at the close of the year, with the forward-looking GfK Group Consumer Climate index expected to decrease from 10.6 points in November to 10.4 points in December. The expected drop in sentiment reflects a moderation in the backward-looking indicators for November amid increased inflationary pressures and rising global uncertainty.
The backward-looking indicators showed a partially mixed picture. German consumers’ economic expectations decreased in part due to the weak performance of the German economy in the third quarter. Consumers expect the strong economic momentum of last year to wane further on trade conflicts between the U.S. and China and the EU; Brexit uncertainty also dragged on consumers’ outlook on the German economy. Lower economic expectations fed through to lower income expectations. Higher energy prices eat into consumers’ pockets, lowering their purchasing power and partly negating the positive income effects from increasing employment. The unemployment rate dropped to 5.1% in October and reached a new post-reunification low.
On the other hand, consumers’ propensity to buy has been left undeterred by increasing headwinds. In fact, consumers became more willing to spend their money on sound labor market developments promoting a sense of increased job security.