German consumer confidence plunged to series low

Chris Scicluna
Emily Nicol

German consumer sentiment declines to series low as income expectations plunge
After the Commission’s flash euro area consumer confidence indicator posted a surprising (albeit modest) improvement in April (up 1.8pts from March’s 22-month low), today’s German GfK consumer survey fell well short of expectations suggesting that households consider the significant negative impact from the Ukraine war and higher price pressures to be offsetting any positive momentum from the easing of pandemic-related restrictions. Indeed, the headline sentiment indicator fell significantly for the second successive month, by a whopping 10.8pts – the second-largest drop on record – to -26.5, a series low. This was almost 3½pts lower than the trough at the start of the pandemic and well below the long-run average (5.0).

While the weakness was broad-based, there was another hefty decline in households’ income expectations as high inflation continued to diminish consumers’ purchasing power. Indeed, the relevant index fell to -31.3 in April, the weakest reading since February 2003. And expectations for the overall economic outlook took another notable step down in April too – the index fell a further 7.5pts to -16.4, some 75pts lower than last summer’s peak and well below the long-run average (7.7). As such, households’ willingness to buy fell sharply for the third consecutive month, suggesting that private consumption will provide little if not support to near-term GDP growth. Indeed, the relevant indicator dropped 8.5pts on the month to -10.5, the lowest since the global financial crisis and some 23pts lower than the long-run average.

French consumers more downbeat at the start of Q2 too
The French INSEE consumer survey similarly reported a further deterioration in confidence at the start of Q2, albeit to a lesser degree than in Germany. In particular, the headline index fell for the fourth consecutive month in April, by 2pts to 88, the weakest reading since the yellow vest protests in late 2018, some 15pts lower than last year’s peak and well below the long-run average (100). Despite a very modest improvement in households’ expectations of their future financial situation, in part reflecting an anticipated easing in inflation over the coming year, the share of households who think it a good time to make major purchases fell sharply in April, with the corresponding balance down 9pts to -30, well below the long-run average (-14) but still above the initial lows at the start of the pandemic (-59).

UK retail survey expected to point to further weakness in April
Focus in the UK today turns to the CBI’s latest distributive trades survey for an update on retail sector conditions at the start of Q2. Following Friday’s weak retail sales figures for March, the survey is expected to point to a further fall in retail sales this month, as the cost-of-living crisis was worsened by the big jump in household energy bills, rising inflation of other goods and services, and the increase in national insurance contributions. Indeed, according to the ONS’ latest Opinion and Lifestyle Survey, even ahead of April’s more than 50% rise in household energy bills, more than half of households had cut back on non-essential spending on goods and services.

US advance goods trade deficit to have narrowed on the back of cooling imports
In the US, ahead of tomorrow’s Q1 GDP estimate, today will bring advance goods trade figures for March. A slowdown in global growth suggests that exports will likely have maintained the recent sideways trend, although a cooling in imports after a strong run could lead to a modest narrowing in the goods trade deficit last month. Following the weakness in yesterday’s new home sales, attention will also turn to pending home sales numbers for March, as well as the weekly mortgage applications figures. 

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