German Consumer Confidence Improves Despite Upswing in Willingness to Save

On Thursday, September 26, the German GfK Consumer Confidence Indicator brought the German economy into focus.

German Consumer Confidence Improves Modestly

The German GfK Consumer Climate Indicator rose from -21.9 for September to -21.2 for October.

Key highlights from the survey,

• Income expectations advance by 6.6 points to 10.1, contributing to the modest improvement in overall sentiment.
• The upward trend in income expectations supported the Willingness to Buy Indicator, which rose by 4 points to -6.9 points, its highest level since March 2022.
• However, the Economic Expectations Indicator declined by 1.3 points to 0.7 points amidst concerns about the labor market.
• The Willingness to Save Indicator also reflected concerns about the labor market and economic outlook, rising by 1.3 points.

Nuremberg Institute for Market Decisions (NIM) consumer expert Rolf Buerkl commented on the September survey, saying,

“After the severe setback in the previous month, the slight improvement in consumer climate can be interpreted more as a stabilization at a low level. The consumer climate has not improved since June 2024, when it hit -21 points. Therefore, the slight increase cannot be interpreted as the beginning of a noticeable recovery. The consumer sentiment is generally too unstable for that.”

Labor Market and Inflation Influence ECB Rate Path

Key sub-components of the Consumer Climate Indicator sent mixed signals. An upward trend in the Willingness to Save and concerns about the labor market overshadowed higher Income Expectations and the Willingness to Buy. A pullback in consumer spending may dampen demand-driven inflation, raising expectations of a Q4 2024 ECB rate cut.

However, the ECB could reassess sentiment from the October survey before the December interest rate decision. A marked decline in the Willingness to Buy could elevate expectations of a December interest rate cut.

Expert Views on the ECB Rate Path

Pictet Wealth Management Head of Macroeconomic Research Fred Ducrozet commented on sentiment toward the ECB rate path, stating,

“Markets now pricing in 15bp for the 17 October meeting. With only three weeks to go the ECB may not have enough data points to tip the balance. September HICP (due 1 October) is likely to see headline inflation drop below 2% but services inflation still close to 4%.”

EUR/USD Reaction to German GfK Consumer Climate Survey

Before the German GfK Consumer Climate report on Wednesday, the EUR/USD fell to a low of $1.11288 before climbing to a high of $1.11520.

However, EUR/USD reacted to the GfK Consumer Confidence report, the EUR/USD dipped to a low of $1.11475 before rising to a high of $1.11515.

On Wednesday, September 26, the EUR/USD was up 0.14% to $1.11480.

Up Next

The ECB Economic Bulletin, scheduled for later in the European session, will also require investor attention. Views on inflation, the economic outlook, and the interest rate path could impact EUR demand amidst speculation about a Q4 2024 ECB rate cut.

Additionally, US data will influence EUR/USD price trends later in the session.

US jobless claims, finalized GDP numbers, and durable goods orders could influence the Fed rate path. Barring a downward revision to the GDP data and dire durable goods orders, jobless claims will likely impact the EUR/USD more.

Economists forecast initial jobless claims to increase from 219k (week ending September 14) to 225k (week ending September 21). A modest increase could support expectations of a soft US economic landing. However, a spike above 250k may reignite fears of a hard landing, possibly triggering a flight to safety.

Finally, Fed Chair Powell’s speech on Thursday could give further insights into the economic outlook and Fed rate path.