German Consumer Sentiment Tumbles into September

BERLIN (Reuters) – German consumer sentiment is set to tumble going into September as slightly rising unemployment, job cuts, and insolvencies drive down income expectations, pushing back hopes of stable economic recovery, a survey showed on Tuesday.

The consumer sentiment index, published by GfK and the Nuremberg Institute for Market Decisions (NIM), fell to -22.0 points for September from a slightly revised -18.6 in August, below the forecast of -18.2.

A decrease in income expectations contributed to this decline, dropping to 3.5 points from 19.7. Although many households experienced an increase in purchasing power, it wasn’t enough to alleviate concerns about the rising uncertainty in the labor market.

According to NIM consumer analyst Rolf Buerkl, the recovery observed in August was merely temporary due to the European Championship.

“Slightly rising unemployment figures, an increase in company insolvencies, and staff reduction plans at various companies in Germany are causing a number of employees to worry about their jobs,” said Buerkl, adding that these factors are dampening hopes for a sustainable economic recovery driven by private consumption.

Unemployment has risen more sharply than usual during the start of the summer break, with economic institutes forecasting an increase in corporate insolvencies. Job cuts have also been recently announced at firms such as Deutsche Bahn, Bayer, and ZF Friedrichshafen.

Consumer Climate Components

NOTE: The survey period was from Aug. 1-12, 2024.

The consumer climate indicator is a forecast of real private consumption in the following month. A reading above zero indicates year-on-year growth in private consumption, while a value below zero signals a drop compared to the same period last year.

According to GfK, a one-point change in the indicator corresponds to a year-on-year change of 0.1% in private consumption.

The “willingness to buy” indicator reflects the balance between positive and negative responses to the question: “Do you think now is a good time to buy major items?”

The income expectations sub-index assesses expectations regarding household finances for the coming 12 months, while the business cycle expectations index evaluates respondents’ perceptions of the general economic situation over the next year.