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German consumers are feeling increasingly doubtful about the country’s economic recovery.
Image Source: The Business Times
The GfK consumer climate index, which forecasts consumer sentiment, is expected to drop to -21.8 in July from -21.0 in June, marking the first decrease after four consecutive months of improvement. This change fell short of economists’ expectations of a rise to -19.5.
Rolf Buerkl, a consumer expert at the Nuremberg Institute for Market Decisions, commented, “The interruption of the recent upward trend in consumer sentiment shows that the road out of sluggish consumption will be difficult and there can always be setbacks.”
Image Source: Reuters
The inflation rate in Germany rose to 2.4% in May from 2.2% in April, heightening consumer uncertainty and increasing their propensity to save rather than spend. The survey also indicated declines in income and economic expectations and a decreased inclination to make purchases.
This negative shift in consumer sentiment mirrors a broader trend observed in Germany’s business sector, with both the Ifo business climate index and reports from private-sector firms indicating deteriorating sentiment.
Despite the slowdown in the first quarter of 2024 and an economic contraction at the end of the previous year, the European Central Bank’s recent decision to cut interest rates might provide some relief to German consumers. Economists are hopeful that this might boost consumer spending and contribute to economic growth in the latter half of the year.
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