July 28, 2022
Due to growing inflation, the declining trend in consumer confidence in Germany continues into July. The tendency to purchase has only slightly decreased, but expectations for the economy and income have once more dropped dramatically. As a result, GfK anticipates a drop in consumer sentiment of -30.6 points for August 2022, down 2.9 points from July of this year (revised from -27.7 points). These are the conclusions from the July 2022 GfK Consumer Climate Study.
This indicates that consumer sentiment has fallen short of the record low set last month. The present figure is the lowest that has ever been recorded since data gathering for all of Germany began in 1991. “There are now doubts about sufficient gas supplies for businesses and households next winter, in addition to worry about disrupted supply chains, the war in Ukraine, and skyrocketing energy and food prices. Consumer sentiment has reached an all-time low as a result, according to Rolf Bürkl, a consumer specialist with GfK. particularly because a lack of natural gas will likely increase pressure on energy prices and inflation.
It will be crucial for a recovery in consumer sentiment that their concerns about insufficient gas supplies are allayed and that all opportunities for alternative suppliers are utilized to replace any Russian gas supplies that may not materialize. This is in addition to fighting inflation through a less expansionary monetary policy from the European Central Bank.
Consumers are becoming more concerned about an imminent recession. Economic expectations are now at -18.2 points, a 6.5-point decline from the prior month in July. This is the lowest reading since the pandemic-related lockdown of Germany in April 2020. At that time, the measurement was -21.4 points. This marks a reduction of over 73 points when compared to the same time last year.
Expectations for income are still falling off quickly. In July, the indicator declined 12.2 points, down to -45.7 points. The present figure is the lowest that has ever been recorded since data gathering for all of Germany began in 1991. Income expectations have decreased by over 75 points since July 2021.
The purchasing power of individual families is currently being reduced by the high inflation rates, which range between 7 and 8 percent. Energy prices are likely to increase further if natural gas supplies from Russia are curtailed or possibly interrupted entirely in the upcoming weeks. Additionally, the present depreciation of the euro versus the dollar has increased the cost of German imports into Germany.
The pull of declining economic and income expectations is too strong for the propensity to purchase to totally resist. The indicator just marginally declines to -14.5 points with a loss of 0.8 points. In October 2008, during the height of the financial and economic crisis, a lower score of -20.1 points was recorded.
Source: Growth from Knowledge – GfK
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