German consumer confidence index is stable despite the recent recession

- Mar 20, 2019-

Although the Ifo index fell again and continued to issue a warning of economic recession, German consumer confidence remained stable. The German Consumer Research Association (Gesellschaft für Konsumforschung; GfK) conducted a monthly survey of 2,000 consumers. The results showed that the consumer confidence index remained at 10.8 points in March. The last time above this value was in May (2018). . (I) Ifo business climate index fell again

Ifo conducted a monthly survey of about 9,000 corporate managers, the business sentiment index fell by 0.8 points in February (2019) to 98.5, which has been falling for the sixth time in a row, the lowest since December 2014. . Economists had expected the decline to only 99 points. Ifo president Clemens Fuest said that the German economy is still weak.

Business managers are not satisfied with the current situation of their business. They are not optimistic about the prospects for the next six months. The industry will also expand into industry, service industry and even construction industry. Only trade has not declined.

(II) Ifo's export index rebounded

However, Ifo subsequently released the German exporter confidence index for 2,300 industrial companies in February, after a four-month decline in the past, it rose 1.2 points to 7.2 points. Ifo president Clemens Fuest said that the German business community is in a difficult situation. In the global economic environment, it is expected that the export volume will not increase or decrease, and the performance of different industries will be different. The export of food and beverage industry is expected to increase substantially. In contrast, the development of mechanical engineering has weakened significantly in recent months. It is expected that the extra orders from abroad will be minimal.

(3) The economic recession is not impossible

Uwe Burkert, chief economist at Landesbank LBBW, said that it is almost impossible to grow against the trend, unless the situation of Brexit and trade disputes is clear; Andreas Rees, chief economist at Bank Unicredit, believes that the United States imposes tariff threats on European vehicles. The possibility of a recession in Germany is 40%.

The German economy has not grown since the second half of 2018. The Ifo Institute expects a slight increase of 0.2% in the first quarter of 2019. However, Ifo expert Klaus Wohlrabe said that this forecast does not include the punitive tariff warnings of President Trump's European import of cars in the export expectations. . Wohlrabe believes that once punitive tariffs are imposed, the export outlook should collapse.

(4) German Finance Minister is still optimistic about the prospects

In this regard, German Finance Minister Scholz said that Germany's economic development is still good, not worried about the economic recession, but it is still expected to show an upward trend, although it will only be suppressed.

In the third quarter of 2018, the German economy fell by 0.2% for the first time in a year and a half. The economic performance of the two consecutive quarters has declined, which is the economic recession. In the fourth quarter of 2018, the performance was flat, and it was almost a recession. The German federal government is expected to grow 1.0% this year. In 2018 it was 1.4%.

(5) The job market is booming and driving consumer confidence

Despite doubts about the economic downturn, German consumer confidence remains stable. GfK expert Rolf Bürkl said that the job market is still performing well, and many companies are still actively looking for new employees to promote wages. The expectation of rising consumer income and the willingness to continue to increase consumption outweigh the concerns of the economy. The stable performance of the consumer confidence index will be able to successfully resist the trend of economic slowdown.