German Consumers Undeterred By Slowing Economy

german gfk 012617 26feb19

Germany's consumer confidence is set to hold steady in March, as income expectations remained stable, though households increasingly worry that the biggest euro area economy would slip into recession.

The forward-looking consumer confidence indicator showed a reading of 10.8 for March, same as in February, survey data from the GfK revealed Tuesday. The outcome was in line with economists' expectations.

"This means that the consumer climate in the first quarter of this year shows a stable trend at a good level and is so far bracing itself successfully against the tangible economic slowdown," the Nuremberg-based market research group said.

The Ifo Institute said last week that the latest survey results as well as other indicators point to economic growth of 0.2 percent in the first quarter.

Economic expectations continued its steep downward spiral and the relevant survey indicator dropped for a fifth month in a row to its lowest level in three years.

The economic expectations measure of the survey shed a further 6.5 points to reach 4.2, the lowest value since March 2016, when the score was 0.5 points.

"Consumers feel that the risk of the German economy slipping into recession again has tangibly increased in recent weeks," the GfK said.

Germany's economy stagnated in the final three months of 2018, thus narrowly avoiding a technical recession, official data confirmed last week.

Gross domestic product was unchanged from the third quarter, when the economy shrunk 0.2 percent. Two consecutive quarters of contraction would have meant the biggest euro area economy entered recession.

Germany's growth momentum was hurt mainly by external factors such as global trade tensions and the Brexit uncertainty.

Household consumption edged up 0.2 percent after a 0.3 percent decline in the previous quarter.

The GfK has forecast 1.5 percent growth in private consumption this year.

Meanwhile, the income expectations index of the GfK survey edged up to 60 points in February from 59.9 points in January. A strong labor market underpins income expectations.

The propensity to buy index decreased four points to 53.6 in February, but the continued high level suggest an upbeat mood among German consumers, the GfK said. The propensity to save showed another tangible decline prompted by very low interest rates.

The latest GfK survey was carried out between February 1 to 15 and the results are based on around 2,000 consumer interviews per month conducted on behalf of the European Commission.

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