German consumer climate under pressure in October: Gfk

German consumer climate was under pressure in October as income expectations and propensity to buy “had to take losses,” according to a monthly study published Friday by German market research institute GfK.

Consumer climate in Germany had fallen to its lowest level since November 2016 with a value of 9.6 points while the economic expectation indicator even fell to minus 13.8 points, the lowest value in seven years.

The risk that Germany could “slide into a recession” had increased again recently, according to consumer expectations. After it had slightly recovered in September, the economic outlook continued its long-term downward trend in October.

The monthly consumer climate index by GfK is based on a survey of around 2,000 representative individuals.

According to GfK, there were various reasons for the low figures. Trade conflicts, “Brexit chaos”, recent job losses in the German automotive industry and on the financial market as well as the global economic downturn, had “dampened the mood of consumers again and optimism is dwindling.”

Financial institutes like Deutsche Bank had reacted to European Central Bank’s low-interest-rate policy with branch closures and redundancies, GfK stated. In the German automotive sector, GfK even predicted further job cuts caused by the transition to electro-mobility.

Private consumption would remain an “important pillar for the German economy this year” if the current crisis would not escalate further and both policy and the economy “counter the rising fear of job losses,” commented Rolf Buerkl, consumer expert at GfK.

Falling to 39 points, the lowest value in almost six years, the income expectation indicator recorded a downfall too, decreasing by 7.8 points in October. Although the economic expectations had been on a downward trend since 2018, the income outlook had so far remained “largely unaffected.”

However, being “well above” the long-term average of approximately zero points, the mood of Germans with regards to their income was still “satisfactory.” According to GfK, German consumers assumed that their financial position would develop positively, even though a “sense of euphoria” had been dampened after three consecutive decreases.