Big drop in German consumer confidence beats hopes of economic growth

A key survey shows Germans preparing to tighten their belts rather than boost private consumption, the sector which provides half of the GDP in Europe’s biggest economy.

Europe’s top economy, Germany, has seen economic uncertainty, including job losses in the car industry, send consumer expectations to their lowest level in seven months.

The Gfk Consumer Climate Indicator, a key survey of 2,000 individuals, dropped by 4.9 points to -23.3 points, showing a worsening mindset across consumers for December 2024. The forward-looking indicator was expected to be around -18.6.

“The income expectations fall sharply and the willingness to buy declines slightly”, said pollsters GfK and the Nuremberg Institute for Market Decisions. Meanwhile, they added, “the willingness to save, rises” leading to a significant drop in the overall desire to buy for the last month of the year.

Concerns about job security in the light of industrial layoffs and related stark growth forecasts played their role, too. German consumers are also more pessimistic about the development of the general economic situation for the fourth month in a row.

Private consumption, providing approximately half of Germany’s GDP, is expected to drop at a time when the country’s economy is already struggling to avoid recession, and its export sector is facing major setbacks, as fears grow that the incoming US administration may apply trade tariffs on European goods.

France also battles a gloomy outlook

Separate data shows that French households are similarly losing confidence in their future finances.

According to the French statistics office INSEE, household consumer confidence decreased to 90 points in November from 93 in October and remains below its long-term average (100).

French households expect a sharp rise in prices and a decline in their finances over the next 12 months.

Households expect a sharp decrease in the standard of living in the country – the indicator is at its lowest since October 2023.

Meanwhile, there is a mounting fear regarding unemployment, with the indicator reaching its highest level since May 2021.