Germany: Consumer sentiment expected to inch up in June but to remain downbeat nonetheless
The GfK consumer climate index is forecast to rise from a record low of minus 26.6 in May to minus 26.0 in June.
The expected improvement in sentiment came on backward-looking data for May, which is released simultaneously and underpins the June expectation. Consumers’ economic expectations rose markedly, although they remained in negative territory. Consumers are still wary of a recession amid lingering supply chain issues and their impact on the productive capacity of the economy. Income expectations also turned less sour but were still downbeat, driven by elevated inflation which is eating into consumers’ pockets. Consequently, propensity to buy deteriorated in May.
Analysts at the EIU commented:
“The Russian invasion will drag further on growth in 2022. Germany is among the most exposed countries to Russian energy imports […], and the EU’s decision to phase out two-thirds of Russian gas this year will therefore lead to a significant spike in German energy costs, particularly in the industrial sector. Other spiking commodity prices will also weigh on purchasing power, and hence on private consumption.”