German Consumer Morale Improves Further As Coronavirus Restrictions Fade
The lifting of restrictions imposed to contain the coronavirus has made German consumers more eager to take out their wallets and more positive about their income prospects, a survey showed on Thursday.
The consumer sentiment index, published by the Nuremberg-based GfK institute and based on a survey of around 2,000 Germans, rose to -9.6 heading into July, rebounding from -18.6 the previous month and beating a Reuters forecast for -12.0.
The pandemic is expected to sink Germany into its worst recession since World War Two and the government has approved two stimulus packages financed with record new borrowing to revive the economy, including lower value-added tax (VAT) rates from July 1 for six months to boost consumption.
"The extensive support provided by the economic stimulus packages, such as the announcement of a temporary reduction in VAT is certainly a contributing factor," said GfK's consumer expert Rolf Buerkl.
He added, "Provided that retailers and manufacturers also pass these reductions on to consumers, it can be assumed that one or two planned purchases will instead be made in the second half of 2020, thereby supporting consumption this year."
Both economic and income expectations rebounded into positive territory, two sub-indices showed, lending support to expectations that consumption will pickup as economic and social life returns to normal.
GfK said the government's unprecedented rescue package of 750 billion euros and an additional stimulus programme worth 150 billion euros had made Germans more confident that the economy would recover faster than they had originally thought.
Rising unemployment and higher numbers of workers on short-time schemes subsidised by the government were putting the breaks on a stronger rebound in consumption, which before the crisis had provided impetus to the economy.
GfK said it survey's headline reading gauging the mood among consumers in Europe's largest economy was the third lowest ever recorded.