Germany: Consumer sentiment expected to deteriorate in March
The GfK consumer climate index is forecast to drop to minus 8.1 in March from minus 6.7 in February on the back of rising infections and elevated price pressures.
The expected deterioration in sentiment came on the back of backward-looking data for February, which is released simultaneously and underpins the March expectation. The data showed that income expectations suffered a notable blow due to high inflation, which is posing a threat to purchasing power despite a tight labor market. Moreover, propensity to buy also worsened in the wake of lower income expectation; however, the gradual lifting of restrictions on daily life should ensure that German consumers will continue to spend. More positively, economic expectations increased in February as consumers expect the economy to grow at a brisker pace this year.
Analysts at the EIU added:
“As 2022 progresses, the release of pent-up demand will help to lift private consumption, although the normalisation of retail and services activity will remain prone to setbacks as new coronavirus variants continue to emerge.”