German Confidence: GfK Consumer Climate Erodes

Climate eased in March after improving in February. There still is a net improvement compared to January, but we must turn the calendar back to April 2024 to find a climate reading lower than the current level in March. In sum, there is no sense of ongoing improvement for climate in this report. The economic expectations and income expectations readings, which lag by one month, do show some improvement on a longer timeline. But the propensity-to-buy index is still quite weak.

Climate at -24.7 in March has an 8.2 percentile standing on data back to 2002. The economic expectations, reading, fell back to 4.3 in February from 6.6 in January to set a 49-percentile standing. Income expectations rose to 6.3 in February from 5.1 in January. Income expectations have a 42.4 percentile standing. The propensity to buy weakened sharply to -9.3 in February from -4 in January. Its percentile standing is at a 30.7 percentile level, a bottom one-third standing.

The table also presents consumer confidence readings for three other European economies. Among them, Italy has the strongest ranking at a 74-percentiel standing. The Italian reading is up-to-date through January and has been showing improvement. The United Kingdom and France have similar standings. The U.K. standing is at its 43.7 percentile mark, below its median on this timeline. The U.K. reading is up-to-date through January and has been showing a tendency to improve. France has a rank standing at a 39.7 percentile; it is up-to-date through February. The index has been very slowly improving.

The bottom line is that confidence has mostly stabilized in Germany and across Europe. But most of that is done at relatively weak levels of confidence. Italy is the exception, with an above median nearly top one-quarter standing—but it has no upward momentum. Stabilization sure beats deterioration, but the readings are weak and have been weak, and it is really time for Europe to be mounting a drive to better conditions. The sense of upward momentum across these confidence readings is extremely weak—mostly lacking. The never-ending war between Russia and Ukraine is one reason for this performance. Another has been the ongoing battle to reduce inflation, but that battle now seems to be nearly won. Still, it is not clear how much space exists to cut rates further. The Bank of England has to make more progress on inflation, and when it does, rates there can come down. But in the EMU, there may not be much more left in the way of monetary stimulus. Meanwhile, fiscal policy has been employed nearly to the max in France and in the United Kingdom. A good chunk of fiscal policy is being used to rebuild armaments as Euro-NATO has realized it must do more to protect itself. There continues to be a lot in play as 2026 unfolds.