German Consumer Confidence Holds the High Ground

The look-ahead consumer climate metric from GfK for Germany shows an uptick in April. Confidence sits in the top 2 percentile of its historic rank of all confidence measures for Germany since early-2002.

The components for the GfK indicator are released with a lag. Each of the three components shows strong readings with two of the three metrics (income and buying propensity) residing above the 90th percentile of their respective queues of value. The economic expectations component resides in its 88th percentile, a still-strong reading.

The table also offers comparisons with France and Italy, the next two largest economies in the EMU, as well as the U.K. whose secessionist actions from the EU have impacted adversely its confidence readings.

Despite a difficult economic environment in which Italian GDP has not yet regained its pre-recession level of GDP, Italian consumer confidence stands at the 97th percentile of its historic queue of readings since 2002. In addition, Italy is undergoing substantial political disharmony; yet, none of that has harmed consumer confidence which continues to rise smartly in March.

In France, confidence fell two months ago. This month’s reading has held that same lower reading. French confidence stands in the 87.7 percentile of its historic queue of data. .

The U.K. has the lowest standing in this group, at its 62nd percentile of its historic queue of readings. However, the U.K. reading has been rising from even weaker readings as the Brexit process continues and as the pound sterling has been recovering. The Bank of England has put the U.K. in the tightening cycle by having started to raise rates, but it has been slow about following up the first rate hike with a second one.

On balance, these country-sourced measures agree with what the overarching EU Commission indexes have been saying about consumer confidence. Confidence on the part of consumers is very high. One thing this clearly means is that consumers feel good about job security. That is one of the most important elements in consumers being confident.

Consumer confidence is a bit of an odd statistic. It does not always signal how consumers are going to change their spending habits, which is one of the main things we want to know about their behavior. For now we have good signals from consumers and growth is still on track. These are positive signals for the EMU as well as for the U.K. economy moving forward.