Brandenburg Gate in Berlin, Germany

Germany Consumer Confidence September 2019

Germany: ECB’s renewed dovishness boosts German consumer sentiment in October

Sentiment among German consumers is expected to increase from 9.7 in September to 9.9 in October, according to the GfK German Consumer Climate Study. However, backward-looking data for September, which are released at the same time, showed a mixed picture underlying the anticipated improvement in sentiment.

Views on the economy improved slightly but economic expectations remained entrenched in pessimism nonetheless; anecdotal evidence highlights lingering fears of a recession in the Euro Area’s largest economy. This is mainly due to protracted uncertainty around the Sino-American trade conflict and Brexit concerns spilling over from export-oriented sectors to the wider economy. Consequently, income expectations continued to moderate in September, although they remain at a healthy level. “Being able to maintain this good level going forward will depend primarily on future developments on the labor market which has so far remained stable”, noted GfK. While the labor market remained tight through August, other data shows that job creation in the private sector is stalling owing to the downturn in the manufacturing sector. As such, if the unemployment level were to raise, this “would put additional strain on the income indicator and the good levels currently being enjoyed would not be sustainable”, according to GfK.

Yet the drop in optimism regarding the economic situation and income expectation did not affect Germans’ propensity to buy in September. In fact, their willingness to part ways with their cash increased; the European Central Bank’s increased dovishness following its September meeting drove the improvement. This, however, simultaneously negatively affected German consumers’ propensity to save as “consumers fear that in the future commercial banks could also impose penalties on private investors”, GfK stated.

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