Consumer confidence in Germany has declined again, a downturn attributed to the conflict involving Iran. According to data released by GfK and the Institute NIM on Monday morning, consumer expectations are falling more sharply than in the previous month. Income expectations are particularly lackluster, and consumer propensity for purchasing also reflects palpable pessimism. However, the inclination to save has seen a slight reduction but remains at a high level.
The consumer estimate for income saw another significant drop in April, plummeting 18.1 points to reach -24.4 points. The report attributes this steep fall to a combination of cooled economic forecasts and increasingly high price expectations, noting that income expectations are strongly tied to the inflation the public anticipates.
In terms of spending, purchasing intent dropped by 3.5 points, settling at -14.4 points. This marks the lowest level seen over a two-year period. In contrast, the saving propensity, which measures whether people consider saving advisable given the general economic conditions, showed a minor decrease. This indicator currently stands at a high level, recording a deficit of 2.4 points.
Rolf Bürkl of the Institute NIM noted that consumer sentiment has worsened more dramatically than the previous month, hitting a low of -33.3 points-the lowest reading recorded since February 2023. He explained that the decline in income expectations is directly driven by the heightened inflation rates. Furthermore, this backdrop has led consumers to view the current timing for major purchases as less opportune.
Adding to the uncertainty, the ongoing situation involving Iran continues to weigh heavily on economic outlooks. Survey respondents are forecasting a less positive development for the German economy over the next 12 months compared to last month. This index dropped another 6.8 points, now standing at -13.7 points-a level similar to that recorded in April 2022, right at the start of the Ukraine war. The study authors highlighted consumers’ growing concern that the tentative recovery of the German economy could be seriously hampered, especially if the conflict persists and government measures fail to yield results.