German consumer morale darkens unexpectedly: GfK

March 26, 2019

BERLIN (Reuters) – German consumer morale deteriorated unexpectedly heading into April, a survey showed on Tuesday, suggesting that household spending could weaken in the second quarter of this year.

Domestic demand is expected to be the sole driver of growth this year in Europe’s largest economy as exporters struggle with a global slowdown, trade disputes and Brexit uncertainty.

Record-high employment, hefty pay hikes, moderate inflation and low borrowing costs have helped household spending to replace exports as the most important pillar of economic growth.

The GfK market research group said its consumer sentiment indicator fell to 10.4 points heading into April from a revised 10.7 the previous month. That undershot the forecast of 10.8.

The survey of around 2,000 Germans showed that income expectations fell slightly and propensity to buy dropped to its lowest level in more than two years.

“Despite these losses, consumer mood among Germans remains decidedly positive,” GfK researcher Rolf Buerkl said.

Germany’s robust labor market and rising employment should ensure that consumers continue to spend their money, especially as low interest rates make saving unattractive, Buerkl added.

Buerkl said he expected private consumption to remain an important pillar of economic expansion in Germany this year.

“However, this is reliant on the assumption that the uncertainty caused by Brexit and the trade conflict does not increase further,” Buerkl said, adding that any encroachment of this uncertainty on job market expectations should be avoided.

The survey followed Ifo’s business climate index on Monday which showed that business morale improved unexpectedly in March after six consecutive drops and helped to dispel concerns about the risk of a recession in Germany.

The GfK survey was conducted from March 1 to 15.

(Reporting by Michael Nienaber; Editing by Michelle Martin)

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