Consumer sentiment in Germany brightens slightly

Inflationary pressure in the energy sector remains high

At the same time, economists at Santander Bank are warning of sustained inflationary pressure in the energy sector. They attribute this to several causes: the renewed rise in oil and gas prices, persistently high refinery margins, the gradual phase-out of government support measures, and unfavorable base effects. In a statement, it says: "Der erneute Anstieg der Öl- und Gaspreise, anhaltend hohe Raffineriemargen, das schrittweise Auslaufen staatlicher Unterstützungsmaßnahmen und ungünstige Basiseffekte deuten alle auf einen anhaltenden Inflationsdruck bei der Energie hin."

The Santander economists therefore see the risk that companies will pass on price increases to consumers. The analysis states verbatim: "steigt das Risiko, dass Unternehmen Preiserhöhungen an die Verbraucher weitergeben." If this trend continues, the recently observed recovery in consumer sentiment could quickly be undone again, the experts warn.

Methodology and reach of the GfK index

Observers in Bavaria and across Germany view the development with mixed feelings. On the one hand, the latest data signal that the consumer climate is gradually stabilizing after a longer period of weakness. On the other hand, the further recovery depends heavily on how energy and food prices develop in the coming weeks.

NIM publishes the GfK Consumer Climate Index monthly, which is considered one of the most important leading indicators for private consumer demand in Germany. The index is based on around 2,000 consumer interviews per survey and measures both economic and income expectations as well as the propensity to buy. Methodologically, the institute also takes seasonal fluctuations and a five-year average into account.

For the coming months, the Nuremberg researchers expect a further, albeit slow, brightening of sentiment – provided there is no renewed price surge for energy or food. Bürkl pointed out that consumers have recently been responding more strongly to discounts and promotions in retail, which indicates growing price sensitivity.

Outlook: slow recovery with caveats

The monetary policy of the European Central Bank also plays a role: If the ECB, in view of the described inflation risks, keeps interest rates higher for longer than previously expected, this would additionally burden households' purchasing power and slow a recovery in consumer sentiment. Conversely, falling interest rates could support consumption, provided that banks actually pass them on in full to savers and borrowers.

Overall, a picture of cautious confidence is emerging. Consumers are looking somewhat more positively at their financial situation and the general economic situation, but remain cautious in view of the described price risks. According to NIM's assessment, further development depends crucially on whether inflation can be durably pushed down and energy costs stabilized.

APA and other agencies had previously reported on the data, pointing to the contrast between the brightening sentiment and the inflation warnings. In a CORRECTION report, it was also clarified that the figures refer to the consumer climate index for August.