Surging energy prices undermine income expectations, German consumer confidence hits over three-year low

Golden Ten Data reported on April 27 that German consumer confidence has fallen to its lowest level since February 2023, as Middle East conflicts and soaring energy prices have dampened income expectations and dashed hopes for a moderate economic recovery this year. Germany's Gfk Consumer Confidence Index for May dropped to -33.3 from -28.1 in April, marking the largest decline since October 2022. This downturn follows a decline in the closely-watched Ifo business climate indicator, which last Friday showed its lowest reading in nearly six years for April. With widespread weakness in manufacturing, services, and construction, businesses have become increasingly pessimistic about their prospects in the coming months. Among the approximately 2,000 surveyed consumers, a growing sense of gloom about the outlook is also evident. The report showed that the indicator measuring income expectations fell sharply by 18.1 points to -24.4, reflecting the pressure from rising inflation. The survey also indicated a weakening in consumer willingness to make purchases, while Germans' willingness to save has slightly decreased but remains at a high level. Meanwhile, consumer expectations for the economy have dropped to near the levels seen in April 2022.