German GfK Consumer Sentiment To Hit Fresh Record Low

Germany’s consumer sentiment is set to hit a fresh low in August as fears of an impending recession and high inflation dampened economic and income expectations, survey results from the market research group GfK showed Wednesday.

The consumer confidence index fell to -30.6 in August from revised -27.7 in July. The score was forecast to fall to -28.9.

Consumers are not only concerned about supply chain issues, the Ukraine war and rising energy food prices, but also fears about adequate gas supply for the economy and private households next winter, Rolf Bürkl, GfK consumer expert said.

Both economic and income expectations logged significant declines in July. The economic expectations index lost 6.5 points from the previous month to -18.2 points, the lowest value since April 2020, when Germany was put into corona lockdown.

Concerns about a shortage in the supply of natural gas are weighing heavily on the economic mood, along with the Ukraine war and ongoing supply bottlenecks due to interrupted supply chains, GfK noted. Fear of an impending recession is growing among consumers.

The income expectations index declined 12.2 points to -45.7 in July, the lowest score since the survey began in 1991.

High inflation had a negative impact on the purchasing power of households. Energy prices are set to continue rising if natural gas deliveries from Russia are restricted or even stopped completely in the coming weeks.

Moreover, the current weakness of the euro against the US dollar makes the imports even more expensive. This could exacerbate the inflationary pressures and weigh on income mood of consumers.

The propensity to buy index dropped only slightly by 0.8 points to -14.5 in July. A lower value of -20.1 points was last measured during the financial and economic crisis in October 2008.

If significantly more money has to be spent on energy and food, there is a lack of funds for other purchases, GfK noted.

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