German consumer sentiment is set to drop in March as higher inflation dampened income prospects, market research group Gfk said on Wednesday.
The forward-looking consumer confidence index unexpectedly fell to -8.1 in March from -6.7 in February. The score was forecast to improve to -6.3.
While the economic outlook improved somewhat, income expectations and the propensity to buy declined from the previous month. A declining propensity to save in February is preventing a more significant decline in consumer sentiment, the survey showed.
The coronavirus infection rates, which were rising sharply at the time of the survey, in connection with high inflation figures, are causing the consumption indicator to slip again.
Rolf Bürkl, GfK consumer expert said, “Nevertheless, the prospects for the coming months are quite positive.”
Consumers’ willingness to spend is expected to return. “If this were supported by a moderate increase in prices, the consumer climate could finally recover again in the long term,” Bürkl added.
Among sub-components, the economic expectations index gained 1.3 points to 24.1 in February. Consumers assumed that the German economy will grow more strongly again after a weaker first quarter of 2022. Rising private consumption will also play an important role.
The income expectations indicator declined 13 points to 3.9, which was the lowest value in more than a year. High inflation is the greatest threat to income prospects, said GfK.
At 1.4, the propensity to buy was down by 3.8 points from January. Despite the current decline in the propensity to buy, the further prospects for a recovery in consumer sentiment are quite favorable.
Moreover, the decision to gradually lift measures to combat the pandemic will ensure that the propensity to consume will also recover.
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