Consumer confidence in Germany has weakened in September, reversing the slight improvement seen in August, according to data from market-research group GfK. The country's forward-looking consumer-sentiment index is forecasted to tick down to minus 25.5 in September, compared to a revised minus 24.6 in August. This reading is slightly weaker than the expected minus 25.0, as reported by a consensus of economists.
The decline in consumer confidence follows a decrease in business sentiment, with the Ifo business-climate indicator falling for the fourth consecutive month. GfK uses three sub-indexes for the current month, August, to determine the sentiment figure for the upcoming month. The negative outlook is primarily driven by falling income expectations and a declining propensity to buy.
One of the main factors contributing to the decline in confidence is the ongoing increase in food and energy prices, which is weighing on purchasing power. Inflation in July remained high at 6.2%. As a result, the chances of consumer sentiment recovering before the end of the year are diminishing.
The survey also revealed that consumers have become significantly more pessimistic about economic development in Germany. The indicator measuring economic development reached its lowest point in 2023 in August. Overall, private consumption is unlikely to have a positive impact on economic growth in 2023 and may instead hinder growth prospects, according to GfK.
It is clear that the combination of negative income expectations, decreasing propensity to buy, and concerns about rising prices has dampened consumer confidence and outlook for the German economy.
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