German Confidence for December Remains Extremely Weak

GfK provides a lookahead confidence measure for Germany. For December, the confidence measure logs a -40.2 reading; this is a slight improvement from -41.9 in November and -42.8 in October, but it's still considerably weaker than September's -36.8 and August value of -30.9. German confidence clearly has moved to an even lower level over the last three months, and it continues to hover in this lower position.

The components of the climate index lag the headline by one month. They offer data for November: economic expectations improved in November to -17.9 from -22.2. Income expectations improved to -54.3 from -60.5 while the propensity to buy worsened slightly to -18.6 from -17.5.

The count or rank standings for these metrics give us a better idea of where confidence sits in absolute terms. The climate index has been weaker 0.8% of the time (only in the previous two months!). Economic expectations have been lower 11.6% of the time. Income expectations have been lower 0.8% of the time. The propensity to buy has been weaker 17.3% of the time. The propensity to buy metric is significantly less weak than the other components; however, it is still quite dramatically weak because the 17 percentile standing means that it's weaker than this less than one-fifth of the time.

The table also presents percentile standing data on where the components sit in their high-low range. Climate is at its 4.8 percentile mark. In other words, quite apart from how frequently the reading is lower, a separate question regards how low is it compared to its all-time low? Its lowest reading is only 4.8 percentage points below its current reading. The economic index has its all-time low only 14.6% lower than its current reading. Income expectations are only 10.4% lower. The propensity to buy lowest reading is 30.7% lower. Buying conditions are not as dramatically weak.

So not only are the current readings weak and rarely weaker but most of them are quite close to their historic all-time lows, marking this as not just a difficult point but as an extremely distressed situation that has a great deal of absolute weakness.

For comparison, I have the most up-to-date confidence data from Italy, France, and the United Kingdom as well. Those metrics lag by one month and are comparable in timing to the components for the German index as of November. Italian confidence improved sharply to 98.1 in November from 90.1 in October; French confidence improved to 83.4 from 82.1; and the U.K. confidence improved to -44.0 from -47.0.

We've seen increases in confidence across these three countries and in November we had also seen the slight increase in confidence in Germany as well. However, the count percentile standings for the other countries in the table are also quite weak. For the U.K., confidence is weaker 1.2% of the time marking the U.K. reading as a still an exceptionally weak reading. The reading for France is weaker 8.4% of the time- also quite weak. The reading for Italy is weaker 33.9% of the time; Italian confidence doesn't seem to be as greatly affected as in other places. The range percentiles for these three countries show the U.K.'s lowest low about 9% lower than the current reading; France's low is lower by 13.6%; and Italy's lowest low is 42.4 percentage points lower than the November reading. Only Italy shows any pretense of having a confidence reading anywhere close to the normal range while both France and the U.K. show confidence metrics that are infrequently lower and then, rarely substantially lower- the current readings are distressed.

Summing up Conditions in Europe remain difficult. Economies are struggling; the central banks are raising rates to fight off a still very difficult inflation surge. And the war in Ukraine is on their doorstep and continues to be a risky of phenomenon. Central banks are going to continue to raise rates for some time because inflation is deeply rooted, and inflation has begun to turn lower only very slowly. Economic situations in Europe are likely to get worse before they get better. And the confidence readings right now are not in very good shape.