German consumer sentiment provided an inconsistent picture in October. The propensity to buy again increased, whereas economic and income expectations fell. Due to the propensity to save considerably decreasing, GfK forecasts a value of 0.9 points in consumer sentiment for November, up 0.5 points from October (revised from 0.4 points).
Consumer sentiment increased again, owing mostly to the increased propensity to consume and the reduced propensity to save. The propensity to save dropped by 13 points MoM, and now stands at -45.2 points. Consumer sentiment was last measured at a higher level in April 2020, at 2.3 points.
"The consumer sentiment defies rising inflation," said GfK consumer expert Rolf Bürkl. "German citizens are clearly anticipating future price increases. That is why they are considering making purchases, in order to avoid even higher prices. If the surge in prices continues, consumer sentiment would be strained, and a fundamental recovery would be delayed further."
Following the previous month's increase, the economic expectations indicator fell by 1.9 points. However, this remains at a very high level, currently 46.6 points, increasing by almost 40 points compared to the previous year.
The high level implies that consumers are still optimistic about the German economy's recovery. However, the economic picture is tainted by the fact that some companies, such as those in the automotive industry, are forced to reduce production due to a lack of supplier parts.
Following a positive previous month, the income expectations indicator decreased by 14.1 points to 23.3 points. However, this is a YoY increase of 13.5 points.
This indicator currently appears to be suffering the most from mounting inflation costs. Furthermore, the employed are concerned about losing earnings from short-time work since companies are having to cut back on production due to disrupted supply chains.
Despite decreases in economic and income expectations, the propensity to buy increased for the second consecutive time. After a 6 point increase, the indicator now stands at 19.4 points, the best value in 10 months. However, this is a decrease of 17.6 points in comparison to the previous year.