German consumer confidence softens

28 June 2023

Emily Nicol
, 
Chris Scicluna

German consumer sentiment softens for first time in nine months as households signal greater desire to save
After the flash PMIs and ifo survey suggested a deterioration in German business confidence at the end of Q2, this morning’s GfK survey results similarly reported a softening in consumer sentiment. The drop in the survey’s headline index – presented as a forecast for July – fell for the first time in nine months, declining by 1pt to -25.4. That is roughly equidistant between the level just before the Russian invasion of Ukraine early last year and the series low reached last autumn after wholesale gas prices hit extreme highs. Importantly, it also remains well below the series average (3.1). Within the survey detail, German consumers appeared somewhat more downbeat about prospects for their personal finances, and also tempered their optimism for the economic outlook. Perhaps unsurprisingly given higher interest rates, they also reported a significant increase in their willingness to save. Nevertheless, their stated willingness to spend also increased back close to the top of the range of the past year, albeit remaining low by historical standards. Overall, therefore, and probably unsurprisingly, the GfK survey suggests that German private consumption is likely to remain at best subdued in the coming quarter.

French consumer confidence rises to a 13-month high despite a further weakening in household purchase intentions
In contrast to Germany but consistent with the improvement reported in yesterday’s Italian ISTAT survey, today’s INSEE survey suggested that French consumer sentiment recovered in June. In particular, the headline indicator increased 2pts to 85, a thirteen-month high, but nevertheless remained well below the long-run average (100) and still too close for comfort to the series low (80) recorded last September. Within the survey detail, households were reportedly the most upbeat about the prospects for the economic outlook since Russia’s invasion of Ukraine, with income expectations also the highest since February 2022 as unemployment fears continued to recede and price expectations fell to the lowest level in fourteen years. Like in Germany, today’s survey suggested an increase in the share of households considering it a suitable time to save. But the share of households considering it a suitable time to make major purchases maintained a downwards trend, with the respective survey index the second-lowest since the survey began in 1981, suggesting that French private consumption is likely to remain subdued over the near term.

Euro area bank lending and flash Italian inflation estimates in focus today
Amid ongoing uncertainties about the current nature of monetary policy transmission in the euro area, the latest money supply figures for May will be watched for further evidence of the impact of the past year’s aggressive monetary policy tightening on lending and deposit holdings. Meanwhile, ahead of the euro area’s flash inflation estimates on Friday, today will also bring the first of the national preliminary inflation figures from Italy, which are expected to show that the headline HICP rate fell sharply in June, by more than 1ppt from 8.0%Y/Y in May.

Sintra discussion panel featuring Lagarde, Powell, Ueda and Bailey today’s clear highlight
Aside from the data, after yesterday’s hawkish speech by Christine Lagarde, focus will rightly remain on the ECB’s central bank forum in Sintra. Indeed, this afternoon’s monetary policy panel discussion with Lagarde, Powell, Ueda and Bailey looks very much the day’s main event. Separately in Sintra, BoE Chief Economist Pill will also join a panel discussion on ‘lessons from recent experiences in macroeconomic forecasting’ chaired by ECB Chief Economist Lane.

Advance goods trade data due from the US
In the US, today brings advance goods trade figures for May. While exports are likely to have remained subdued amid sluggish global demand, a softening in imports not least related to lower prices of petroleum products might well see the deficit narrow from the six-month high recorded in April ($97.1bn). Daiwa America’s economist Lawrence Werther forecasts an easing of around $4bn. 

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