By Marco Babic
ZURICH (MaceNews) – Confidence among German consumers improved in July, bolstered by a cut in the value-added tax (VAT) and showing a V-shaped recovery in consumer confidence.
The GfK index of consumer sentiment rose to -9.4 in July from -18.6 in June, driven by improvements in all of the main components, leading GfK to predict that consumer confidence will improve to -0.3 in August.
The propensity to consume improved the most of the major components in July to 42.5 from 19.4 the previous month and is only modestly below the July 2019 reading of 46.3, with buyers planning larger purchases over the rest of the year.
Economic expectations rose to 10.6 from 8.5 in June, with the July reading the best since December 2018 when it stood at 10.8 points. GfK said this improvement is due to the recently approved economic stimulus package, but added the caveat that Covid-19 infection rates remain low and there isn’t a second wave of cases with a further lockdown, which would leave all hopes for an economic recovery “amounting to nothing.”
Income expectations also improved in July to 18.6 points from 6.6 in June, driven higher by payments of child-bonuses and “noticeably lower price expectations.”
Despite the improved outlook, GfK consumer expert Rolf Buerkl cautioned that current improvements might not be sustainable. Dealers and manufacturers have to be prepared for the possibility of lower consumer confidence when the VAT reverts back to its previous level in January 2010 Buerkl said.