Germany: Mood among German consumers deteriorates to six-month low
October 28, 2016
In November, the mood among German consumers weakened. The forward-looking consumer confidence indicator published by the GfK Group edged down from October’s 10.0 points to 9.7 points in November, the worst reading since June 2016.
In addition to the overall consumer confidence indicator, which estimates consumer sentiment in the coming month, the GfK provides three sub-indicators, which refer to October. The GfK commented that October’s reading paints a mixed picture of the economy. While consumers became more optimistic concerning overall economic prospects for the first time in four months, they became more downbeat regarding their income prospects and propensity to buy.
Households’ expectations of the economy improved in October as “consumers seem to have digested the British people’s decision to leave the European Union”. The upward revision of the 2016 GDP projection by the German government in early October and a solid labor market contributed to improving households’ view on the country’s economic prospects.
Income expectations, on the other hand, slid for the second month running in October. In the GfK’s view, “consumers assume that the price-curbing effects of low oil prices […] will now cease to apply”. This suggests that the real income gains that resulted from low energy prices will soon fade. Owing to a decline in income expectations, German consumers were less inclined to buy. Likewise, GfK pointed out that the propensity to save increased in November, which also contributed in lowering consumer’s willingness to buy.