German consumer sentiment set to weaken in November, shows GfK survey

Germany’s consumer sentiment is expected to ease in November, according to GfK. The sentiment has not followed a uniform trend in October. Even if economic prospects are rebounding again following three straight falls, both income expectations and propensity to purchase have dropped. The overall consumer sentiment indicator is set to drop to 9.7 points in November from 10 in October. This is the first time since June 2016 that the indicator has dropped below the ten-point mark.

Economic expectations improved by gaining 6.2 points to 13 in October. Consumers, for the first time have accepted the fact that the U.K. will exit the European Union. Following the Brexit vote, the indicator dropped three times in succession. Meanwhile, the German government recently raised its growth projection for 2016 to 1.8 percent from 1.7 percent. It expects the GDP to grow 1.4 percent in the forthcoming year.

On the other hand, income expectations dropped below the 50-point mark in October. The indicator dropped by 7.8 points to 44.8, the lowest since November 2015, when it recorded 44.4 points. However, in spite of the drop, there continues to be marked optimism about income. But consumers believe that the price-curbing impacts of low oil prices would cease to apply. Therefore the real income gains for private households, which have resulted from low energy prices, would diminish.

Overall, the weakening of consumer confidence in Germany is not due to the hard facts of domestic trends, but is more due to an external trade environment that has become quite difficult. The forecast shows that global economic growth would continue to be subdued.