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    German Consumer Sentiment Hits the EUR as Lockdown Measures Bite

    Abstract:Consumer takes a bigger hit than expected in Germany, with extended lockdown measures weighing on the propensity to buy and income expectations.

      German Consumer Sentiment

      For February 2021, the GfK is forecasting a slide in consumer sentiment from a revised -7.5 to -15.6 points.

      There was a sharp fall in the propensity to buy indicator, while the economic and income expectations indicators saw relatively modest falls.

      Propensity to Buy

      As a result of the closure of the restaurant trade and large portions of the retail sector, consumer spending has taken a hit.

      The propensity to buy indicator tumbled by 36.6 points to zero, which is comparable to a slide of 36 points back in April 2020.

      COVID-19 Threat to Germany

      In spite of the availability of COVID-19 vaccines, a recent GfK survey showed that 81% Germans view COVID-19 as a significant or very significant threat to Germany.

      To put it into perspective, this is the highest figure recorded since the survey began in April 2020.

      Income Expectations

      The income expectations indicator fell for a 4th consecutive month to just 2.9 points. A 6.5 points fall left the indicator down by 47.5 points year-on-year.

      Strict lockdown measures through to mid-February raised the prospects of a wave of bankruptcies across affected industries. The shift in mood fueled fears of job losses, ultimately weighing on income expectations.

      Additionally, lockdown measures will likely lead to an increase in the number of short-term workers. This is expected to weigh further in household incomes.

      Economic Expectations

      By contrast, the economic expectations indicator fell by a more modest 3.1 points to 1.3 points.

      In spite of the 3.1 points decline, the indicator was up by 5 points from the same time a year ago.

      Stable labor market conditions, supported by the manufacturing sector, delivered a more modest decline.

      Upon release of the figures, the EUR slid from $1.21629 to a current day low $1.21519.

      While manufacturing sector activity in Germany has picked up, the ECB had been relying upon a consumption driven Eurozone economic recovery.

      The propensity to buy and income expectations indicator could temper the ECBs outlook near-term.

      At the time of writing, the DAX futures down by 30 points.

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