Germany: Low consumer confidence expected to dip further

German consumer confidence is likely to dip in September, according to market research institute GfK's monthly barometer. 

GfK's researchers expect their consumer confidence to drop 0.9 points to -25.5 in September, after a very slight increase was logged in August against July. 

"The consumption climate currently shows no clear trend, neither upwards or downwards, while at a very low level overall," Rolf Bürkl from the GfK said. 

"The chances that the consumer mood can sustainably recover this year therefore is shrinking ever more," Bürkl said. "Persistently high inflation rates, above all for food and fuel, are ensuring that consumer confidence is not picking up at the moment."

High inflation and interest rates, no end to Ukraine conflict in sight

The barometer has been more or less stable at unusually low levels since the summer of 2022, amid rising inflation, the aftermath of the COVID pandemic and Russia's invasion of Ukraine. This was also around the time energy prices reached their peak. 

July 2022's figure of -27.4 was an all-time low for the index.

Inflation has since started to fall but remains far higher than the target level of 2%. 

These pressures have been coupled with rising interest rates in Germany, as in most Western countries, as central banks try to tame inflation, by discouraging borrowing and spending. 

The institute warned that people's readiness to consider large purchases was also on the wane. 

The survey by the Nuremberg-based GfK (whose initials stand for the English phrase growth from knowledge) also found that people's salary expectations and their expectations for overall economic growth were falling. 

Germany's GDP growth figures dipped in the last quarter of 2022 and the first of 2023, before creeping back to just above breaking even in the second quarter. A negative overall growth figure for the year is currently considered a possibility by some, though the government predicts marginal growth for the year.  

The coalition government is currently working on a package of measures designed to encourage more economic activity, with a Cabinet meeting on Tuesday and Wednesday this week hoping to make a breakthrough on the plans.

But some of the mooted policies, perhaps most notably an electricity subsidy for heavy industry, are contentious within the three-party coalition. 

msh/ab (AFP, dpa, Reuters)