German consumer morale set to cloud over in July

German consumer sentiment is set to fall into July due to a decline in economic and income expectations, a GfK market research survey showed on Wednesday.

The institute’s consumer sentiment index dropped to -25.4 heading into July from a slightly revised -24.4 in June, below the expectations of analysts polled by Reuters of a reading of -23.0.

“The current development in consumer sentiment indicates that consumers are once again more uncertain,” said GfK consumer expert Rolf Buerkl.

This is the first setback for the indicator after eight consecutive increases, he added. “Continued high inflation rates are noticeably eroding the purchasing power of households and preventing private consumption from making a positive contribution,” Mr Buerkl said.

While the propensity to buy rose slightly, economic and income expectations declined.

The consumer climate indicator forecasts the development of real private consumption in the following month. An indicator reading above zero signals year-on-year growth in private consumption. A value below zero indicates a drop compared with the same period a year earlier.

According to GfK, a one-point change in the indicator corresponds to a year-on-year change of 0.1 per cent in private consumption.

The “willingness to buy” indicator represents the balance between positive and negative responses to the question: “Do you think now is a good time to buy major items?”

The income expectations subindex reflects expectations about the development of household finances in the coming 12 months.

The additional business cycle expectations index reflects the assessment of those questioned of the general economic situation in the next 12 months. – Reuters

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