GfK Backs Down Again in September

The GfK consumer climate index for Germany has fallen, reaching a new lower low in September at -36.5. This is a drop from August when the index was at -30.9. The index dropped from its previous all-time low to a new lower low in September. The monthly decline of 5.6 points is the biggest monthly decline since May of this year and represents real month-to-month deterioration, not just some further slippage. A month-to-month decline larger than 5.6 points occurs less than 2% of the time…and this is a drop from what had been an all-time low

The components for the GfK index lag by one month; we have component values for August as the most up-to-date readings. The August reading for economic expectations improved slightly to -17.6 from -18.2 in July. The August reading for economic expectations stands in the lower 11th percentile of its historic queue of data. Income expectations also improved slightly, logging a -45.3 reading in August compared to -45.7 in July. The July reading was the all-time low for the income series so the ranking for August income expectations is in the lower 0.4 percentile of its historic queue of data. The propensity to buy reading for August slipped further to -15.7 from -14.5 in July; this reading has a lower 17.6 percentile queue standing.

All the components are weak. The propensity to buy is in the lower 20th percentile of its queue of data, economic expectations are in their lower 11-percentile while income expectations are just a few ticks off their all-time low, logging the second lowest reading on record. These are not encouraging signs for Germany or for the consumer.

Other Europe There are also readings for Italy, France, and the U.K. in the table; these are up to date through August. In Italy, consumer confidence improved to 98.3 in August from 94.8 in July. In France, the INSEE reading moved to 82.2 from 79.6. But in the U.K., there was deterioration as the consumer confidence reading fell to -44 from -41 to reach a new all-time low for U.K. confidence.

The confidence reading for France sits in the lower 4.5 percentile of its historic queue of data. The reading for Italy sits at the 35.7 percentile, a standing mark that is still weak but not as dramatically weak as for most of the German components as well as the confidence readings for France and the U.K. Conditions in Italy are just simply different. Italy's government has fallen; the country has a lot of divisions because of its socialist traditions and its populist Five-star party that has not been a dependable coalition partner for any of the more traditional parties. Even when they form a coalition, the government is not stable. The fact that consumer confidence in Italy is higher than in other places is not so much that Italy is on better footing, but that Italians are more used to chaos.

Consumer conditions in Germany, and in these three other European countries, clearly have been disrupted and are well below historic levels of neutrality. Each of these countries is experiencing high inflation: for France, Italy and Germany, the ECB is providing the inflation fight. For the U.K., it's the Bank of England that is fighting. However, they all face inflation problems and they face central banks that are squeezing the economy, raising interest rates, and slowing economic growth to try to gain control of inflation again. And, of course, Europe has the issue of gas supply, sourced out of Russia, to continue to worry about. When it comes to worries, Europeans’ plates are full.