German consumer confidence remains high, Gfk finds
German consumer sentiment is expected to worsen in March, according to a survey published on Thursday.
The GfK consumer sentiment index fell to 9.8 for April from 10.0 in March, below the consensus forecast for it to remain unchanged.
But economic expectation, a measure that has been found to correlate best with spending, recovered from a significant drop the previous month.
This business expectations indicator rose 8.4 points to 18.1 points, and in comparison to last year is up by almost 18 points.
Households’ willingness to buy improved while the willingness to save worsened.
Despite the decline in the consumer climate, Germans remain on a shopping spree, Gfk said, with sentiment still high in comparison to the past.
"GfK forecasts that there is light at the end of the tunnel for the current minor blip in the consumer climate, if the inflation rate is to fall again due to the current decline in crude oil prices."
But the report conceded that additional risks persist for the consumer climate, such as the uncertainty with regards to US economic direction, imminent Brexit negotiations, as well as the open outcome of the elections in France, Germany and potentially in Italy.
"Nevertheless, private consumption will remain an important tower of strength for the overall economic development this year. Therefore, GfK confirms its prognosis from the start of the year, which forecasts that private consumption will rise by 1.5%."
Economist Claus Vistesen at Pantheon Macroeconomics said it was a slightly disappointing headlines, but the details were better.
The fall in income expectations for the second month, looked "odd" in light of a tightening labour market.
"It could be a sign that consumers don’t think they will be fully compensated for the rise in inflation via a corresponding increase in nominal wages. That said, expectations remains overall elevated and we still think nominal wage growth will accelerate this year.
Looking at the results of the survey over time, he felt the business expectations index has not been a perfect indicator for retail sales growth recently.
"For what it’s worth, though, it indicates that the recent slowdown is unlikely to get worse."