Driven by a slump in energy prices from record highs, the level of consumer sentiment in Germany is likely to improve in April. That said, based on the GfK Institute survey, there is no reason to expect it to fully recover in the near future.
The GfK forecast shows promise in improving consumer sentiment to -29.5 in the first half of April as compared to the March figures of -30.6. This is slightly below the consensus estimate which projects GfK Consumer Confidence Index at -29.0.
As demonstrated by the Institute’s report, the April figures, which went up for the sixth month in a row, suggest that sentiment is on the road to recovery, although the growth rate has slowed down quite a bit.
“The anticipated loss of purchasing power is preventing a sustained recovery of domestic demand,” said GfK consumer expert Rolf Buerkl. He also emphasized that the chances of the German economy recovering this year are rather slim due to the increase in private consumption.
The expert added that the insufficient level of consumer confidence also bore evidence of this.
A sub-index measuring earnings expectations was the primary factor for improving sentiment. It hit its 10-month high, totaling -24.3 in March and -27.3 in February.
"The income outlook is currently benefiting from noticeably lower prices for energy, especially for gasoline and heating oil. Nevertheless, inflation will remain high," Buerkl noted.
Given the Gfk German Consumer Climate Index, we can make forecasts about the evolution of real private consumption in the upcoming month.
Reading above zero implies that private consumption is growing year-over-year. If the index moves below zero, this is a sign of a decline compared to the same period a year earlier.
With that, GfK believes that the annual change in private consumption is 0.1% if there is a one-point change in the index.
Login in Personal Account
105
