Germany: Consumer confidence set to rise in February
Consumer confidence opened the year on a stronger note than previously estimated, with the GfK Group Consumer Climate index revised upwards from 10.4 to 10.5 in January. The forward-looking index for February shows a further improvement in sentiment is on the cards, with confidence expected to increase to 10.8 in February. However, the underlying, backward-looking indicators for January paint a mixed picture.
On the one hand, the outlook on the German economy became less rosy for the fourth month running in January. Consumers continue to worry over the effects that trade tensions between the U.S. and China, as well as between the U.S. and EU, will have on the German economy. Additionally, Brexit-related uncertainty continued to impact consumers’ outlook on the economy.
On the other hand, both income expectations and the propensity to buy rose in January. Income expectations increased markedly on the back of labor market developments, as a shortage of skilled laborers in certain industries propped up wage growth. This indirectly positively affects pensioners’ incomes, which are linked to wage developments; it also fed into an increased willingness to buy, despite the slowing economic momentum. At the same time, saving is an unattractive alternative due to low interest rates.