In October, consumer confidence in Germany showed a slight increase, reaching its highest level since April 2022. However, ongoing challenges continue to impact overall sentiment.
According to the latest GfK Consumer Climate report from GfK and the Nuremberg Institute for Market Decisions (NIM), the Consumer Climate index is projected to rise by 2.7 points for November, hitting -18.3 points, an improvement from the revised -21.0 points seen in October. This marks the second consecutive month of growth in consumer sentiment.
This increase can be attributed primarily to improved income expectations and a heightened willingness to make purchases. The forward-looking indicator, which surveyed over 2,000 German households, reflects shifts in consumer perceptions regarding income expectations, economic outlook, and purchasing readiness.
Rolf Bürkl, a consumer expert at NIM, commented, “Following the slight improvement in the previous month, the Consumer Climate continues to improve. It has reached its highest level since April 2022, when -15.7 points were recorded after the onset of the war in Ukraine.”
Nonetheless, Bürkl emphasized that lingering economic uncertainties and inflationary pressures continue to cloud consumer optimism. “The uncertainty stemming from crises, conflicts, and rising prices remains prevalent, inhibiting factors that stimulate consumption, such as real income growth, from fully exerting their influence,” he noted.
Enhanced Income Expectations Drive Consumer Spending
A significant positive factor in consumer sentiment was the increase in income expectations, which jumped by 3.6 points to reach 13.7 points. This marks a notable 29-point improvement compared to the same period last year.
Diminishing inflation rates, combined with substantial wage growth across various sectors, have fostered a sense of real income growth among consumers. Even pensioners are experiencing real increases in income, which have been rare in recent years due to high inflation.
The boost in income prospects has directly influenced consumers’ willingness to spend, rising by 2.2 points to -4.7 points, its strongest level since March 2022. This indicates a cautious yet growing inclination to make purchases—but despite this improvement, consumer spending remains significantly below pre-crisis levels, and any unforeseen economic shocks could swiftly dampen enthusiasm.
Economic Expectations Decline Amid Recession Concerns
Despite the signs of recovering consumer confidence, apprehensions regarding Germany’s economic outlook linger.
Economic expectations among consumers have dented for the third consecutive month, with a slight decrease of 0.5 points, bringing the economic expectations indicator to just 0.2 points—its lowest since March 2024. Recently, the German government downgraded its growth forecast for 2024, predicting a 0.2% contraction in GDP, reflecting these muted expectations.
Consumers are also worried about corporate stability and job security, with information about increasing insolvencies and potential job cuts further fueling economic anxiety.
Bürkl explained, “The rising number of company insolvencies and announcements of layoffs or production relocations continue to impede a more robust recovery in consumer sentiment.”
Market Reactions and Stock Performance
The DAX index saw a gain of 0.4%, reaching 19,620 points on Tuesday. This marks its second consecutive session of gains and positions it within 0.5% of its all-time high set earlier this month.
Among the top-performing stocks were Daimler Truck Holding AG, Continental AG, and Adidas AG, which rose by 1.7%, 1.3%, and 1.2%, respectively. Notably, Adidas reported a remarkable 71% increase in Q3 net profit alongside strong sales growth in China.
German stocks are aligning with the prevailing positive sentiment across Europe, with the EuroStoxx 50 index climbing 0.5% as investors closely monitor quarterly corporate earnings.
Meanwhile, France’s CAC 40 advanced by 0.7%, while Italy’s FTSE Mib and Spain’s IBEX 35 saw increases of 0.2%.
Photo credit & article inspired by: Euronews
