Brexit and Terror Threat Dampen Consumer Confidence in Germany

GfK Consumer Climate Study for Germany for September find that Brexit and terror threat dampen consumer confidence.

The overall consumer climate index is forecasting 10.0 points for October, following 10.2 points in September. Both economic and income expectations, as well as propensity to buy suffer losses. It would seem that German citizens believe that their country's economy is set to develop more weakly over the next few months. This is signaled by the third successive drop in economic expectations. Although the income expectations and propensity to buy indicators also recorded losses this month, they remain at an extremely high level.

It appears that consumers feel the German economy will develop somewhat more moderately in the coming months. The indicator fell by 1.8 points in September to 6.8 points. This marks the third decline in a row. Despite these losses, economic expectations remain clearly above zero, in other words, above their long-term average of 0 points.

It looks as if the Brexit decision from June has now started to have an impact. In the three months since the referendum, economic expectations have continuously fallen. The announcement that Great Britain will leave the EU has caused uncertainty to rise. This has also led to the Ifo Business Climate Index falling in July and August.

Another consequence is that the forecasts for the growth of European gross domestic product were recently somewhat downgraded. In its economic outlook for Germany, the German Federal Bank has also slightly cut its figures for economic growth for this year and the next in comparison with the forecasts issued a few months ago.

Moreover, consumers are undoubtedly feeling more unsettled due to the greater public awareness of the terror threat following the attacks in Bavaria. A general feeling of uncertainty such as this is often associated with a drop in economic expectations.

The results are an extract from the "GfK Consumer Climate MAXX" study and are based on around 2,000 consumer interviews per month conducted on behalf of the European Commission.