German Consumer Confidence Weakens More Than Expected

Germany's consumer confidence is set to deteriorate at a faster than expected rate in December as households turned more cautious amid the fourth wave of coronavirus and high inflation, results of a survey showed Thursday.

The forward-looking consumer confidence index fell to a six-month low of -1.6 from 1.0 in November, which was revised from 0.9, the market research growth GfK said. Economists had forecast -0.5 reading.

Consumer sentiment weakened after rising for two months in a row. The latest reading is the lowest since June, when it was -6.9 points.

The latest GfK survey was conducted from November 4 to 15.

GfK consumer expert Rolf Burkl said consumer sentiment is currently being squeezed from two sides.

"On the one hand, the number of cases in the fourth wave of the coronavirus pandemic is exploding, which threatens to overwhelm the health system and could lead to further restrictions," Burkl said.

"On the other hand, the purchasing power of consumers is dwindling due to a high inflation rate of four percent."

"The outlook for the upcoming Christmas season is now somewhat bleak," the GfK expert added.

The index for economic expectations dropped for a second successive month, falling by 15.6 point to 31.

Germany's recovery is beginning to falter, mainly due to supply bottlenecks, and the growth forecast for this year has been revised down to 2.7 percent.

A shortage of semiconductors for consumer electronics, household appliances and motor vehicles has led to a reduction or even complete halt to production, which is affecting economic growth, GfK noted.

The income expectation indicator fell further in November, by 10.4 points to 12.9 points, the lowest since April this year. The latest decline was less severe than in October when the index dropped more than 14 points.

GfK noted that income expectations are being influenced by high inflation and an associated reduction in the purchasing power of income as well as by production restrictions caused by interruptions in supply chains that increase the fear of short-time work.

As income and economic expectations eroded, the propensity to buy indicator fell by 9.7 points to reach 9.7, the weakest score since February.

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