Germany: Consumer confidence to remain slightly pessimistic in August despite improvement
July 23, 2020
Consumer confidence in Germany is expected to continue recovering in August, despite remaining pessimistic: The forward-looking GfK Consumer Climate Index is projected to rise from July’s minus 9.4 to minus 0.3—the highest level since the health crisis and in part due to the reduction in VAT.
The projected improvement reflected rosier backward-looking data for July, which is released at the same time and underpins the August estimate. Economic expectations improved further and reached their highest level since December 2018. This came on the back of consumers’ expectations that the German economy should be able to recover from the Covid-19 crisis in a relatively quick manner, underpinned by the government’s massive fiscal stimulus. However, the outlook remains vulnerable to a potential second wave of infections. Income expectations, meanwhile, continued to rise as well, reflective of the prospect of child bonus payments and softer inflation expectations. Lastly, the reduction in VAT until the start of next year propped up propensity to buy, which skyrocketed from the prior month.
Author: Jan Lammersen, Economist