Germany’s GfK Consumer Sentiment index for June improved significantly, rising from -24.0 to -20.9 and surpassing expectations of -22.5. This marks the fourth consecutive month of improved sentiment.
In May, economic expectations jumped from 0.7 to 9.8, while income expectations rose from 10.7 to 12.5, the highest level since January 2022. Willingness to buy edged up slightly from -12.6 to -12.3, and willingness to save dropped sharply from 14.9 to 5.0, the lowest value since August 2023.
Rolf Bürkl, consumer expert at NIM, explained that “falling inflation rates combined with considerable wage and salary increases strengthen consumer purchasing power. This stimulates income expectations and also reduces consumer uncertainty, which was responsible for the comparatively high willingness to save in previous months.”
Despite these positive trends, Bürkl noted that uncertainty still lingers among German consumers. This is attributed to the lack of clear future prospects in the country, which undermines planning certainty for significant purchases. “People will have to regain this certainty before they are willing to invest their growing purchasing power in larger purchases,” he added.
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Full German Gfk consumer sentiment release here.
ECB’s Panetta advocates for prompt and gradual policy adjustments
ECB Governing Council member Fabio Panetta suggested today that even multiple rate cuts would leave ECB’s monetary policy in a tight stance. Panetta emphasized the importance of managing these adjustments carefully to avoid macroeconomic instability, stating, “When defining the path of policy rate cuts, it should be borne in mind that prompt and gradual action contains macroeconomic volatility better than a tardy and hasty approach.”
Panetta clarified that the anticipated rate cuts should not be seen as economic “stimulus” but rather as necessary adjustments to prevent the monetary policy from becoming “excessively tight” which might otherwise risk an inflation undershoot.
“Over the coming months, if the incoming data is consistent with the current projections, it will be appropriate to ease monetary conditions,” he said. “This will not stop the action to restore price stability.”
Reacting to today’s release of Eurozone inflation data, Panetta described the figures as “neither good nor bad.”