Germany: Consumer confidence expected to pick up in December
Sentiment among German consumer is expected to rise to 9.7 in December from 9.6 in November. The forward-looking index, which is based on simultaneously-released backward-looking data for the prior month, showed that sentiment levels improved in two of the three indicators. Rofl Bürkl, consumer expert at GfK, which releases the confidence index, noted that: “The exceptionally high levels of consumer confidence […] have significantly contributed to preventing a recession in Germany in the third quarter. Private consumption has thereby perfectly fulfilled its role as an important pillar of the economy.”
Economic expectations witnessed a particularly strong mood swing in November, as the subcomponent rebounded from severely pessimistic territory in October to optimistic territory. This was the biggest increase in sentiment levels regarding the economic outlook in over nine years, and the change in mood was likely linked to tentative signs of easing trade tensions between the United States and China. In line with the strong improvement in the economic outlook, income expectations also rose sturdily in November. Consumers continued to expect the tight labor market to feed through to higher wages and pensions, while muted inflationary pressures should further buttress purchasing power of German households. However, external headwinds remain risks as global trade tensions have fed through to job losses in the goods-producing sector; nonetheless, the services sector has seemingly remained in good health.
Meanwhile, willingness of consumers to part ways with their cash declined slightly although it remained elevated. Propensity to buy should remain elevated moving forward given that the European Central Bank remains very dovish and the low interest rates will likely pass through to consumer deposits. The team at GfK added that “private investors face the increasing threat of having to pay penalties when investing their money with banks or savings banks. This may be incentive enough for some who would otherwise save their money for a rainy day to spend their money or purchase more.”