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German consumer morale falls more than expected heading into March
February 23, 2017 / 7:02 AM / 10 months ago

German consumer morale falls more than expected heading into March

BERLIN, Feb 23 (Reuters) - The mood among German consumers worsened more than expected heading into March to reach its lowest level in four months, a survey showed on Thursday, citing rising inflation and economic risks linked to the policies of U.S. President Donald Trump.

The consumer sentiment indicator, published by the Nuremberg-based GfK institute and based on a survey of around 2,000 Germans, fell to 10.0 going into March. A Reuters poll had expected a fall to 10.1 from 10.2 a month earlier.

GfK’s index contrasts with Wednesday’s Ifo index that showed German business morale rose in February, and with bullish overnight comments from the German finance ministry.

Compiler GfK said all three component of its index - overall economic expectation, personal income expectation and propensity to buy - fell after three increases in a row.

“The policies of the new U.S. president are causing uncertainty and economic worry among German consumers,” said GfK researcher Rolf Buerkl.

“Donald Trump’s plans to bolster protectionism are giving rise to job insecurity primarily among workers in industries that rely heavily on exports, such as the automotive and machine engineering, as well as the chemical industry,” he added.

GfK said the subindex measuring consumers’ expectations for the economy fell, but it still remained on a fairly high level, lying six points above the previous year’s reading.

The decline in personal income expectations was put down to rising consumer prices after German inflation picked up to 1.9 percent in January.

“More steeply increasing prices - especially for energy - are diminishing consumer purchasing power,” said Buerkl.

The German economy grew by 1.9 percent in 2016, the strongest rate in five years, driven by private consumption, state spending and construction.

For this year, the German government forecasts a weaker growth rate of 1.4 percent because there will be fewer workdays and exports are likely to rise less strongly than imports.

Germany’s solid labour market, coupled with increased state spending and low interest rates, has boosted consumption.

This trend is expected to continue this year, however at a slightly slower pace.

The GfK subindex measuring the prospensity to buy fell to 51.6, slightly lower than the corresponding period of last year.

“Despite the slight decline, propensity to consume remains high overall,” Buerkl said. “Consumer confidence is still strong.”

MAR 17 FEB 17 MAR 16 Consumer climate 10.0 10.2 9.5 Consumer climate components FEB 17 JAN 17 FEB 16 - willingness to buy 51.6 57.6 52.7 - income expectations 48.1 58.3 56.7 - business cycle expectations 9.7 21.6 3.4

NOTE - The consumer climate indicator forecasts the development of real private consumption in the following month.

An indicator reading above zero signals year-on-year growth in private consumption. A value below zero indicates a drop in comparison with the same period a year ago.

According to GfK, a one-point change in the indicator corresponds to a year-on-year change of 0.1 percent in private consumption.

The “willingness to buy” indicator represents the balance between positive and negative responses to the question: “Do you think now is a good time to buy major items?”

The income expectations sub-index reflects expectations about the development of household finances in the coming 12 months.

The additional business cycle expectations index reflects the assessment of those questioned of the general economic situation in the next 12 months.

Reporting by Joseph Nasr, Editing by Jeremy Gaunt.

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