Consumer sentiment in Germany drops significantly in August

Consumer sentiment in Germany has taken a significant hit this month due to rising unemployment, more insolvencies and a poor economic outlook, according to the latest data published on Tuesday by two consumer research institutes.

In the September forecast, from GfK and NIM, the consumer climate index now only reaches minus 22 points, a deterioration of 3.4 points, the institutes reported.

Before the coronavirus pandemic, the index had been comparatively stable at around plus 10 points.

Expectations regarding income and economic growth have declined, along with consumer spending, while savings rates have risen.

"Apparently, the euphoria of German consumers triggered by the European Football Championship was only a brief flare-up and faded after the end of the tournament. In addition, negative news about job security is making consumers more pessimistic and a fast recovery in consumer sentiment seems unlikely," explained Rolf Buerkl, consumer expert at NIM.

"Slightly rising unemployment rates, an increase in corporate insolvencies and staff reduction plans at various companies in Germany are causing employees to worry about their jobs. Hopes for a stable and sustainable economic recovery must therefore be further postponed," he added.

Private households see their financial situation in the next 12 months as significantly less rosy than a month ago. The income expectation indicator lost 16.2 points.

"The last time there was a more significant decline in the income sentiment within a month was almost two years ago, in September 2022," the two institutes reported. At that time, however, there were significantly higher inflation rates.

For the monthly study, the consumer researchers surveyed around 2,000 people from August 1 to August 12 this time.

The survey was commissioned by the European Commission.