Germany’s consumer confidence will strengthen in May as households were more positive about their income prospects following higher expectations for wage growth amid slowing inflation.
The consumer confidence index rose to -25.7 in May from a revised -29.3 in April, survey results from the market research group GfK showed Wednesday. The score was better than economists’ forecast of -27.9.
Although consumer sentiment improved for the seventh straight month, the value remains below the pre-pandemic level of about three years ago, GfK consumer expert Rolf Burkl said.
Economic and income expectations recovered notably, while propensity to buy registered a moderate gain in April.
The income expectations index advanced 13.6 points to -10.7 in April, the highest since February 2022, before the start of the war in Ukraine.
The GfK survey showed that the major factor behind the positive development in income expectations was more moderate energy prices. Moreover, there were government support schemes to compensate for the high energy prices.
Together with expected rises in income, more households expect high losses in purchasing power, originally feared due to high inflation, will turn out to be much milder.
Nevertheless, private consumption is forecast to remain weak this year and will not be able to make any positive contribution to the overall economic development.
The propensity to buy increased for the third time in a row in April in the face of rising income prospects. The corresponding index climbed 3.9 points to -13.1.
The economic expectations index moved upwards after a small setback in the prior month. The expectations index climbed 10.6 to 14.3 in April. The reading suggested that the economic mood is stabilizing in the positive territory.
The largest euro area economy is projected to stagnate this year. The second half of the year should be somewhat better than the first six months, GfK said.
However, the first quarter flash estimates due this Friday is expected to show that the Germany economy grew in the first three months of the year on the back of a rebound in the manufacturing sector.
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