German consumer morale rises but at slower pace

FRANKFURT: German consumer morale rose again heading into April, a key survey showed Wednesday, but the pace of improvement slowed as concerns about high inflation weighed on Europe’s top economy.

Pollster GfK said its forward-looking survey of around 2,000 people climbed 1.1 points to reach minus 29.5 points, the sixth consecutive monthly increase.

Relief that energy prices are falling, after surging sharply last year following Russia’s invasion of Ukraine, was helping to boost the reading, Gfk said.

But overall the consumer climate remained “very low”, said GfK consumer expert Rolf Buerkl.

“Inflation will remain high this year,” he said. “The expected loss of purchasing power will prevent a sustained recovery of domestic demand.”

The survey found that respondents were more optimistic about their income prospects but, for the first time for several months, they were slightly more pessimistic about the broader economy.

Germany has seen a wave of strikes recently by workers demanding pay rises to keep up with inflation, including a major walkout Monday that caused transport disruption across the country.

The outbreak of the Ukraine war and Russia’s move to slash gas exports sent food and energy costs soaring in Germany, which had long relied on cheap Russian energy imports.

But Berlin rolled out relief measures, helping to ease fears of a sharp downturn, and the government now expects the economy to eke out growth for 2023 as a whole.

Some economists, however, still expect the economy may fall into a short, sharp recession at the start of this year.

After plunging last year, many economic indicators have been recovering in recent months on signs Germany has weathered the Ukraine war fallout better than feared.

However, concerns about a banking sector crisis have hit markets and are adding new uncertainty.

Last week, the closely-watched ZEW investor confidence survey fell for the first time in six months due to the turbulence.