Consumer morale in Germany should suffer a slight decline in July after four months of increases in a row, with the rise in inflation in May reigniting the feeling of uncertainty, according to the GfK barometer published on Wednesday.
The institute forecasts an index at -21.8 points in July, down 0.8 points compared to its value for the month of June, according to a press release.
“The slightly higher inflation rate in the country in May,” at 2.4 percent, 0.2 points higher than in April, “is causing more uncertainty among consumers, which is also reflected in the increase in the propensity to save”, observes Rolf Bürkl, GfK expert.
The upward trend in income expectations has also stopped, the institute notes.
The first cut in interest rates by the European Central Bank (ECB) in June, leaving their historic high, therefore did not help matters.
Germany is living in the fever of Euro 2024 football, with the national team qualified for the round of 16, while the three-party coalition in power, led by Chancellor Olaf Scholz, is torn apart over the next federal budget for 2025.
To reassure consumers lacking confidence before making major purchases, “the government must communicate quickly and clearly the charges and reductions that will be attributed to them at the end of the budgetary discussions”, comments Mr. Bürkl.
Hopes for a rapid economic recovery have also faded among consumers, according to the GfK.
The optimism at the start of the year has also stalled among business owners, judging by the unexpected decline in June of the IFO index released on Monday.
Germany, an exporting country, saw its GDP decline last year, weighed down by the weakening of the industrial sector which must face the rise in the cost of energy and the fall in global demand.
The German government expects growth of 0.3% for the current year, after a decline of the same level last year. The impact of Euro football on Germany’s growth should be minimal at best, or even negative, according to various studies.
ats, awp, afp
