German Consumer Confidence Improves but Spending Outlook Remains Weak

On Tuesday, the German economy was in the spotlight, with German consumer confidence in focus.

German GfK Consumer Climate Indicator Rises to -27.4

The German GfK Consumer Climate Indicator increased from -28.8 to -27.4 for April. Economists forecast an increase to -27.9.

According to the March survey,

• The willingness to save contributed to the moderate improvement in the headline indicator, falling 5 points to 12.4 points. Nonetheless, the 12.4 points continued to signal a lackluster outlook for consumer spending.
• Income expectations increased by 3.3 points to -1.5 points, remaining below levels before the war in Ukraine. The GfK attributed higher income expectations to plans to increase German pensions in the summer.
• Willingness to buy slipped by 0.3 points to -15.3, highlighting consumer jitters about the economy and job security.
• Economic expectations increased by 3.3 points to -3.1 points. However, economic expectations are still down 6.8 points year-on-year.

Consumer Confidence Impact on Expectations of a June ECB Rate Cut

The sub-components of the survey align with investor bets on an ECB June rate cut. A decline in willingness to spend could further dampen demand-driven inflationary pressures. Downward trends in consumer prices match ECB expectations of a softer inflation outlook.

The weak macroeconomic environment may continue to influence saving trends, limiting the effect of income trends on inflation.

EUR/USD Reaction to German GfK Consumer Climate Survey

Before the German GfK Consumer Climate numbers, the EUR/USD fell to a low of $1.08315 before rising to a high of $1.08520.

In response to the GfK Consumer Confidence survey, the EUR/USD rose to a high of $1.08528 before falling to a low of $1.08489.

On Tuesday, the EUR/USD was up 0.11% to $1.08491.

Up Next

ECB Chief Economist Philip Lane is on the calendar to speak. Views on the timeline for an ECB rate cut could move the dial. The ECB Chief Economist discussed growing confidence that wage growth was returning to normal on Monday. The comments supported bets on a June ECB interest rate cut.

US economic indicators also warrant investor attention. Core durable goods orders, house prices, and the CB Consumer Confidence Index will be in focus. The CB Consumer Confidence Index could influence the Fed rate path more.

Economists forecast the CB Consumer Confidence Index to hold steady at 106.7 in March.