German Consumer Sentiment Expected to Drop to New Record Low in August

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By Maria Martinez

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Consumer confidence in Germany is set to fall in August to an all-time low, as inflation weighs heavily on households’ sentiment.

Market research group GfK’s forward-looking consumer-sentiment index forecasts confidence declining to minus 30.6 in August from a revised figure of minus 27.7 in July. August’s figure is below a forecast from economists polled by The Wall Street Journal of minus 29.5.

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“In addition to concerns about disrupted supply chains, the war in Ukraine and souring energy and food prices, there are now concerns about sufficient gas supplies for businesses and households next winter,” GfK’s consumer expert Rolf Buerkl said. Since the collection of data for the whole of Germany started in 1991, the current value is the lowest that has ever been measured.

A tight supply of natural gas is likely to add to the pressure on energy prices and thus inflation, Mr. Buerkl said.

GfK uses data from three subindexes from the current month to derive a sentiment figure for the coming month, measuring consumers’ economic expectations, income expectations and propensity to buy.

While the propensity to buy has only suffered a slight decline, both economic and income expectations have once again fallen significantly in July, according to the survey.

Fears of an impending recession are rising among consumers. Economic expectations fell to minus 18.2 in July from minus 11.7 in June.

Income expectations are continuing their rapid descent in July, falling to minus 45.7 from minus 33.5 in June. This is the lowest value on record, GfK said.

In the wake of falling economic and income expectations, the probability to buy has also declined, with the indicator dropping to minus 14.5 in July from minus 13.7 in June. The diminishing purchasing power resulting from inflation is having an increasing negative impact on the propensity to consume, the report said.

“In addition to fighting inflation through a less expansionary monetary policy from the European Central Bank, it will be crucial for a recovery in consumer sentiment that their concerns about inadequate gas supplies are alleviated,” Mr. Buerkl said.

Write to Maria Martinez at [email protected]

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Credit: www.marketwatch.com /

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