Consumer confidence in Germany is projected to decline in February due to sustained high inflation negatively impacting income expectations and purchasing intentions against the backdrop of slipping economic forecasts.
Data revealed on Friday by the GfK and the Nuremberg Institute for Market Decisions indicated an unexpected drop in the forward-looking consumer sentiment index to -29.7 in February, down from the revised -25.4 in January.
This marks the weakest level since March 2023, contrary to the predictions by economists who forecasted an increase to -24.5.
Rolf Burkl, a consumer expert at NIM, posited that the surge in certainty witnessed in the previous month was merely a fleeting buoyancy before the festive season. However, any optimism for recovery was thwarted in January.
The inclination to save jumped by 6.7 points to 14 in January, marking the highest tally since August 2008.
Consumer income prospects continued to shrink due to escalating inflation. The reinstatement of the standard Value Added Tax rate of 19 percent in the hospitality industry coupled with the hike in the CO2 tax for energy is set to further destabilize expectations, as revealed by the survey.
The indicator for income expectations dropped by 13.1 points to -20 in January, representing the lowest level since March 2023.
The damping effect of poor income expectations impacted the propensity to buy, causing the purchasing intention index to plunge to -14.8 from -8.8.
Additionally, the economic forecast for the upcoming year was evaluated more negatively. The index, at -6.6, lost 6.2 points, marking the lowest value since December 2022.
