After stalling recently, consumer sentiment stagnated in August, dashing hopes for a sustainable recovery. This is shown by the current consumption barometer of the Germany Retail Association (HDE). The index remains at the level of the previous month. Although consumer sentiment is not deteriorating noticeably further, the unchanged level of sentiment indicates that private consumption and the economy as a whole will not recover in the near future.
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Compared to the previous month, consumers' propensity to buy also remains unchanged. At the same time, their propensity to save is increasing. This results in a further shift from consumption to saving. Consumers are planning to intensify their savings efforts. This development was already apparent at the beginning of the year. In the first quarter of 2024, the savings rate was higher than in the same quarter of the previous year. The mixed economic situation and rising unemployment could further strengthen the trend towards precautionary savings. An impulse for private consumption is therefore not expected in the coming weeks.
In view of the subdued course of economic development, consumers' economic expectations are also not characterised by clear optimism. While companies are currently more pessimistic about further developments, consumers' economic expectations are increasing slightly compared to the previous month. Slight optimism is also evident in the increased expectations of consumers with regard to their own income. However, since the propensity to save has increased, the expected increase in income will probably flow into the expansion of the financial cushion and not into private consumption.
A continuation of the recovery in consumer sentiment in Germany is therefore not possible for the time being. Rather, stagnation can be observed. Although there are no signs of a negative trend in the development, the continuing lack of optimism among consumers is clear. A certain uncertainty prevails. As a result, consumers are strengthening their financial reserves and are very cautious about consumption. Against this backdrop, private consumption is unlikely to recover for the time being and will cease to be an economic growth driver.
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