The ongoing energy crisis and high inflation rates are taking a toll on the mood of German consumers, according to new market research figures from Nuremberg-based market research firm Growth from Knowledge (GfK).
GfK has forecast -42.5 points in consumer sentiment for October, representing a downward drop of 5.7 points from September.
"The current very high inflation rates of almost eight percent are leading to large real income losses among consumers and thus to significantly reduced purchasing power,” explained Rolf Bürkl, GfK consumer expert.
"Many households are currently forced to spend significantly more money on energy or to set money aside for significantly higher heating bills," Bürkl said and pointed out: "Accordingly, they need to cut back on other expenses, such as new purchases. This is sending consumer sentiment plummeting to a new record low."
Decline in sentiment caused by drop in income expectations
GfK says that the reason for the sharp decline in consumer sentiment is the decline in income expectations for September.
According to the new figures, the indicator has fallen 22.4 points to -67.7 points. GfK says that this is the lowest that has ever been measured since data began being collected for the whole of Germany in 1991.
The market research firm also pointed out that it is not possible to predict when inflation will make a noticeable improvement with the expectation that consumers will continue facing challenging times over the coming months.
Fears of recession persist
It also said thought that the negative trends in consumer spending will spur on movement toward a recession for the German economy.
Economic expectations have continued a downward trend during September with the indicator dropping 4.3 points to -21.9 — the lowest figure seen since the economic crisis when a drop of -26 points was registered in May 2009.
GfK said consumers are growing increasingly concerned about the German economy slipping into recession. Fears are being compounded by the rocketing energy prices, with concern from both companies and households.
The downward trend is being reflected in the DAX index of 40 blue chip German companies, which fell below 12,000 points for the first time since November 2020.
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