Germany: Slight moderation in consumer confidence expected in August
July 26, 2018
The forward-looking consumer confidence indicator for August released by the GfK Group decreased slightly to 10.6 points, down from July’s 10.7 points. Backward-looking indicators for July—which are released in conjunction with the forward-looking sentiment index—were mixed, likely due in part to escalating trade tensions between the EU and the United States.
In July, income expectations and propensity to buy among German households remained virtually unchanged, as both edged down a mere 0.1 points. Income expectations and propensity to buy remained at an elevated level due to domestic developments, such as positive labor market dynamics. The unemployment rate reported by the Bundesbank in June was at the lowest level since German reunification. Unemployment has been steadily declining in recent years, and the tightening of the labor market should generate further wage and pension growth going forward. Regarding propensity to buy, still-low interest rates are enabling consumers to accumulate debt at a relatively cheap cost.
In contrast, economic expectations plunged in July to their lowest level since February of last year. This was on the back of escalating geopolitical tensions, most notably between the United States and the European Union and China, which could affect the German export-oriented economy.
Germany Private Consumption Forecast
FocusEconomics Consensus Forecast panelists expect private consumption to expand 1.5% in 2018, which is unchanged from last month’s estimate. For 2019, panelists see private consumption growing 1.7%.
Author: Jan Lammersen, Economist