Consumer confidence in Germany is set to weaken further in November reinforcing fears of a recession as private consumption is unlikely to be a pillar of the economy, survey results published jointly by GfK and the Nuremberg Institute for Market Decisions, showed on Tuesday.
The consumer climate index fell to -28.1 in November from a revised -26.7 in the previous month. The reading was worse than the economists’ forecast of -26.6.
“With the third decline in a row, hopes of a recovery in consumer sentiment this year must finally be buried,” Rolf Burkl, consumer expert at NIM, said.
The economic expectations index climbed to -2.4 from -3.4 in September. However, the indicator does not signal a sustained recovery in the economy, the survey said.
By contrast, at -15.3, the income expectations index lost four points. The market research group said income prospects are still in the stranglehold of inflation as rising food and energy prices are damping purchasing power.
The propensity-to-buy index posted -16.3 in October, slightly up from -16.4 in the previous month. The score remained extremely low. A lower value was last seen during the global financial crisis in 2008.
Further, reinforcing the downward trend in consumer confidence, the propensity-to-save indicator rose to 8.5 in October from 8.0 in the previous month.
The survey was conducted among 2,000 consumers between October 5 and 16.
Elsewhere, the purchasing managers’ survey by S&P Global suggested that the German private sector contracted for the fourth straight month in October. The HCOB composite output index ticked down to 45.8 in October from 46.4 in September. A score below 50.0 indicates contraction.
Although manufacturing remained the main drag, the latest contraction reflects a renewed decline in the service sector.
The services Purchasing Managers’ Index, or PMI, posted 48.0 in October, down from 50.3 in the previous month. The manufacturing PMI rose to a five-month high of 40.7 from 39.6 a month ago.
“Germany is kicking off the final quarter on a sour note,” Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said. There is much to suggest that a recession is well underway.
The HCOB estimated that the economy will contract 0.8 percent overall in 2023. “This would make the German government’s -0.4 percent shrinkage call seem pretty rosy,” said Rubia.
Earlier this month, the International Monetary Fund projected Germany to shrink 0.5 percent this year owing to the weakness in interest-rate-sensitive sectors and slower trading-partner demand.
In the monthly report, released Monday, Bundesbank said the largest euro area probably shrunk somewhat in the third quarter. The bank cited weak foreign demand for industrial products as one of the factors that weighed on activity.
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