German Consumer Confidence Improves For Fifth Month - GfK

(RTTNews) - Germany's consumer sentiment is set to strengthen for the fifth month in a row in March amid lower energy prices and recent data signaling that the biggest euro area economy may avoid a recession, survey results from the market research firm GfK showed Friday.

The forward-looking Consumer Confidence Index for March rose to -30.5 points from a revised -33.8 points in February, the Nuremberg based GfK said. Economists had forecast a reading of -30.4.

The latest survey period was February 2 to February 13.

"Despite ongoing crises, such as the war in Ukraine, a weakening global economy, and high inflation rates, consumer sentiment has once again increased noticeably," GfK consumer expert Rolf Burkl said.

"Recent drops in energy prices and reports that experts believe a recession in Germany this year can now be avoided mean that optimism is slowly returning," Burkl added.

However, the low level of the consumer morale indicator suggest that private consumption will not be able to positively contribute to overall economic development in Germany this year, GfK said.

Meanwhile, data released by the statistical office Destatis on Friday revealed that the German economy shrank more than initially estimated in the fourth quarter of 2022, indicating that the biggest euro area economy significantly lost momentum at the end of last year and added to fears of a looming recession in the euro area.

Gross domestic product decreased 0.4 percent quarter-on-quarter, which was a more severe fall than the 0.2 percent estimated initially.

The GfK survey showed that households' income expectations improved for the fifth straight month, and the corresponing index gained 4.9 points to -27.3 points. The reading has added a good 40 points since its all-time low in September 2022.

The stable labor market and the slower rise in energy prices is boosting the optimism. That said, German consumers are set to see a fall in their real disposable income this year as price trends suggests that inflation is likely to exceed the increase in household income.

The propensity to buy index gained 1.4 points in February to -17.3 points, after a fall in the previous month. The fluctuating trend is certainly an expression of the continuing uncertainty caused by the crises but especially by high inflation that will put further strain on the purchases, GfK said.

Germans would be wary of other purchases if they are forced to shell out more for food and energy.

The economic expectations index rose for a fourth month in a row, adding 6.6 points to reach a level of 6.0 points. The latest increase took it above its long-term average of around zero for the first time since the start of the war in Ukraine a year ago, GfK said.

Like the vast majority of experts, German consumers are apparently hoping that the economy would narrowly escape a recession.

Official forecasts signal a 0.2 percent growth for the German economy this year.

The results are part of the "GfK Consumer Climate MAXX" study that is based on around 2,000 consumer interviews per month conducted on behalf of the European Commission.