Consumer confidence in Germany continues its downward spiral, fuelled by a significant deterioration in consumer income expectations revealed in the latest GfK Consumer Climate report released Tuesday. The index now forecasts a further decline to -24.1 points for November 2024, a 1.6-point drop from the revised -22.5 recorded the previous month.
While both economic expectation and willingness to buy showed slight increases, the persistently cautious saving propensity offered little to counteract the overall negative trend. The core driver of this renewed decline is the sharp contraction in income expectation, which plummeted by nearly 13 points, landing at a precarious 2.3 points – the lowest reading since March. This represents a complete erosion of the 11-point gain seen just last month.
“The persistent strained geopolitical landscape, resurging inflation anxieties and anxieties regarding job security are undermining any hopes for a swift rebound in consumer sentiment” stated Rolf Bürkl, Head of Consumer Climate at the Nuremberg Institute for Market Decisions (NIM). These factors are contributing to a palpable shift in consumer behaviour, despite the slight uptick in willingness to buy, which remains deeply entrenched in negative territory at -9.3 points — 4.6 points lower than a year ago. The persistent burden of high food and energy prices continues to curb purchasing enthusiasm.
The stabilisation of economic expectation, after a previous run of declines, provides minimal comfort. Currently standing at 0.8 points, the indicator suggests a limited prospect for robust economic recovery in the months ahead. Leading economists are now projecting a muted growth rate of approximately 1% for the German economy in 2025, following an expected stagnation this year. The concerning data raises questions about the efficacy of current government policies in mitigating economic uncertainty and safeguarding household incomes, prompting calls for more decisive action to bolster consumer confidence and stimulate sustainable growth. The fragile state of consumer sentiment underscores the vulnerability of the German economy to external shocks and the need for a more resilient and adaptable economic strategy.