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German consumer sentiment set to deteriorate in June

Christian Fernsby |
German consumer sentiment is expected to deteriorate in June, according to data released by market research group GfK on Tuesday.

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GfK's forward-looking consumer sentiment index dropped to 10.1 for June from a revised 10.2 in May, missing expectations for a reading of 10.4.

Meanwhile, the economic expectations index ticked down to 1.7 in May from 3.0 in April, while the income expectations index rose to 57.7 from 56.8 the month before.

GfK said "the global cooling off of the economy, the endless discussions around Brexit, and the risk of an escalation of the trade conflict with the USA" played their part in putting a brake on the economic outlook of consumers.

"Persistent trade conflicts pose a particular threat to the export nation of Germany," it said, adding that weak periods of economic activity have a similar effect on export markets.

The propensity to buy index came in at 50.5 in May from 53.1 in April.

"The continuing high level of propensity to buy proves that the mood among consumers remains unchanged," said GfK.

"This is very positive news in light of the general economic uncertainty. This optimism is most certainly due in part to the good and stable situation on the job market. If this positive consumer mood is to continue, therefore, it is essential that employees remain certain regarding the security of their jobs. However, if employees begin to increasingly doubt the security of their jobs, this would put a strain on consumer mood."

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said the headline was disappointing, reversing the rebound at the start of the year and effectively restoring the mild downtrend that started in the beginning of 2018.

"This shift doesn't necessarily mean anything, though. The headline GfK index is not a good leading indicator for consumption, and in any case, it remains high overall. The details - released with one month's lag - are better indicators for spending, and they were mixed this month. The business expectations and willingness-to-buy indices dipped, but income expectations rebounded further from their fall in March, consistent with strong wage growth and a tight labour market.

"In total, this survey continues to signal decent growth in consumers' spending, a message which was finally borne out by the data in Q1 which showed that consumption jumped by 1.2% quarter-on-quarter. We think growth in spending will remain solid, but this run-rate won't be sustained for long. We expect a dip to 0.4-to-0.5% in Q2."


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