OPINION
Market Rating Before FOMC MeetingJan 31
Record Decline in German Consumer Confidence
The noticeable increase in the savings component and sharp price increases were decisive in the consumer confidence index, which was much lower than the level that had been in the spring of 2020, when there were the first closes due to the coronavirus pandemic.
In the context of the decline in economic and income expectations, the purchasing component reportedly decreased for the third time in a row by minus 10.6 percentage points, while this was the lowest level in 13 years, GFK's research said. It was also emphasized that revenue expectations reached a near 20-year low of minus 31.3 percentage points.
According to the details of the report, the war in Ukraine and high inflation rates have dealt a serious blow to consumer sentiment, while it was noted that the rally in energy prices caused consumers' income expectations to deviate as a result of the uncertainties caused by the war, as well as the extensive sanctions imposed on Russia.
From a consumer point of view, the risk to the German economy is increasing further, while the risk of recession is considered unlikely, and further tightening of sanctions against Russia and deteriorating supply chains are slowing the economy.
Finally, the report noted that high inflation rates are eroding the consumer's purchasing power, noting that there will be a sustainable upward trend in consumer sentiment within the framework of peace negotiations on the war in Ukraine.
