Despite the positive mood among consumers, economists expect a decline in economic output this year.
(Photo: dpa)
Dusseldorf Germany’s consumers are looking to spring with confidence. This is shown by the HDE consumption barometer, which after five increases in a row has reached 93.19 points, its highest level since March 2022. Both income and economic expectations have risen sharply, and the propensity to buy has also increased noticeably.
The barometer is calculated monthly by the Handelsblatt Research Institute (HRI) for the trade association HDE. It is based on a representative survey of around 1000 households. Expectations for the coming months are queried, so that the barometer shows the propensity to consume for the near future.
The renewed increase in the HDE barometer coincides with the development of other leading indicators for the German economy. The Ifo business climate index rose for the fifth month in a row, with only the expectations of the approximately 9,000 companies surveyed improving.
The ZEW Index, which is based on a survey of financial market experts, is in positive territory for the first time in a year, and the Markit Purchasing Managers’ Index is also signaling renewed growth for Germany.
The hopes for an upswing may be fueled by rising stock prices and reports of record profits for many listed companies. In addition, it is now considered almost certain that gas reserves will be sufficient this winter and that a shortage could be averted. Energy prices are also falling, if only on the markets so far.
Hard economic data point to a downturn
On the other hand, many end consumers have recently received notifications of sharply rising payments on account, which are partly dampened by the energy price brakes financed by the state. The wage demands of the trade unions, some of which are in the double digits, also seem to be boosting the income expectations of many consumers.
However, the hard economic data paint a different picture. The Federal Statistical Office had to correct its data for overall economic development downwards twice in the fourth quarter of 2022. Now there is a minus of 0.4 percent in the national accounts.
Industrial orders and production are clearly trending downwards. For the current first quarter of 2023, the majority of economists expect a further decline in economic output. Then the national economy would find itself in a technical recession.
The latest data has also dashed hopes that inflation could ease off noticeably after peaking last autumn. In February, the year-on-year price increase was 8.7 percent, only slightly lower than the inflation rate in October 2022 at 8.8 percent.
The increased prices reduce the real purchasing power of consumers. In 2022, real wages fell by 3.1 percent after having been declining in the last two years of the crisis.
>> Read here: According to the DIW, the German economy has not yet bottomed out
The labor market remains the most important guarantee of stability for overall economic development in Germany. “Overall, the labor market was stable despite the tense economic situation,” said the head of the Federal Employment Agency, Andrea Nahles.
The number of unemployed people rose only slightly in February. On the other hand, the number of employees subject to social security contributions increased again, and employment reached a new record high of around 45.5 million people in January.
More: Inflation in Germany remains at a high level – this is reinforcing a new trend on the markets