German consumer sentiment improves heading into February

People walk through Mall of Berlin shopping centre during its opening night in Berlin
FILE PHOTO: People walk through the Mall of Berlin shopping centre during its opening night in Berlin, September 24, 2014. REUTERS/Thomas Peter/File Photo

January 30, 2019

BERLIN (Reuters) – German consumer sentiment picked up heading into February as consumers became more optimistic about their incomes and were more willing to buy, but they became more pessimistic about the economy due to concerns about trade disputes and Brexit.

GfK market research group’s consumer sentiment indicator, based on a survey of around 2,000 Germans, rose to 10.8 points heading into February from a revised 10.5 points the previous month. That beat the forecast of 10.3.

Household spending has become a key growth driver in recent years as Germans benefit from record-high employment, hefty pay hikes and low borrowing costs.

“Rising income prospects and an increasing propensity to buy mean that the consumer climate is improving once more,” Rolf Buerkl, a researcher for Nuremberg-based GfK, said in a statement.

Income expectations also jumped to their highest level since August 2017 while willingness to make purchases rebounded after falling in December, helped by a stable labor market and rising incomes, GfK said.

However, trade disputes triggered by U.S. President Donald Trump’s ‘America First’ policies and deadlock in Britain regarding its expected departure from the European Union – which particularly weighs on exports – dragged consumers’ economic expectations to the lowest level in almost two years.

The German economy grew by 1.5 percent in 2018, the weakest rate in five years and sources have said the government has cut its economic growth forecast for 2019 to 1.0 percent from 1.8 percent.

GfK said it expected private consumption in Germany to grow by 1.5 percent in 2019.

But Buerkl warned that if the trade dispute were to escalate and hit export prospects harder, it would be a bad sign for Germany, adding: “If this were to again increase workers’ fears of job losses, it would have an adverse impact on the consumer climate, jeopardizing the forecast.”

The survey was conducted between Jan. 4 to 18.

(Reporting by Riham Alkousaa; Editing by Michelle Martin)

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