At the beginning of next year, consumer confidence in Germany will remain stable, as the gap between expectations for the overall economic situation and personal finances will increase.
The predicted consumer confidence indicator in January should be 10.4, unchanged from December, research group GfK reported on Friday. Economists had forecast a level of 10.3 for January. On the one hand, the downward trend in economic prospects continues, but, on the other hand, household income expectations are still able to improve, however, a high level, GfK said in a statement.
As the propensity to buy also falls, the consumer climate looks unchanged.
The index of economic expectations fell by 3.3 points to 14.1. The figures were the lowest since February 2017, when it was 9.7, reports GfK. Economic optimism is still low due to the ongoing trade conflict between the US, China and the EU, as well as the uncertainty caused by Brexit. According to GfK, German citizens see risks for their country mainly due to impending trade restrictions, such as increased customs duties and reduced exports. Recent business surveys have shown that the euro zone's largest economy could go into a technical recession, which represents two consecutive quarters of negative growth in the last three months of the year. The income expectations indicator rose by 3.6 points to 53.8, which corresponds to the level of the previous year. According to GfK, the consistently excellent state of the labor market is the main reason for the growth of income optimism. A high level of employment stimulates income growth, which leads to an increase in real income, despite higher inflation. According to GfK, high expectations of financial development are fully justified, since the prospects for the labor market next year remain favorable. Meanwhile, the propensity to buy indicator declined in December by 4.4 points to 53.1 after rising in the previous two months. Favorable domestic conditions, such as a strong labor market and savings, which remain less attractive due to low interest rates, are the main factors that increase the propensity to consume. GfK reiterated its forecast for private consumption growth at around 1.5 percent this year and added that the outlook for 2019 remains favorable. Nevertheless, a further escalation of the trade conflict with the United States or the withdrawal of Britain from the EU without a deal will certainly also create tension for the consumer climate.
Moreover, the domestic policies of Italy and France are currently creating additional potential conflict zones, GfK added.