BERLIN, Germany -German consumer confidence has fallen for the first time since October, a key survey showed Wednesday, after Europe’s largest economy fell into recession and while inflation remained stubbornly high.
Pollster GfK said its forward-looking survey of around 2,000 people fell to minus 25.4 points in July from 24.4 points in June.
The drop is the first since October when the barometer hit a low of minus 42.8 points, as inflation soared and consumers worried about the cost of heating their homes over the coming winter.
German inflation drops to lowest level in more than a year
Consumer confidence bounced back as energy prices stabilized, but the economic outlook has remained clouded.
Inflation has come down from its peak late last year but remained high in May at 6.1 percent.
Meanwhile, the German economy recorded its second-consecutive quarter of negative growth over the first three months of 2023, pushing it into recession.
German economy enters recession
The downturn has left Germany’s top economic institutes predicting the economy will shrink by 0.2 percent over the course of the year.
The drop in consumer confidence “indicates that consumers are becoming increasingly unsettled again”, said GfK expert Rolf Buerkl.
“Continued high inflation rates of about 6 percent are noticeably pinching households’ purchasing power,” Buerkl said in a statement.
The pessimism among consumers could lead them to rein in spending and keep them from “making a positive contribution” to economic growth in Germany this year, the GfK said.
“A ray of hope could be the trend in recent months that inflation rates are falling further,” it said.
The loss in purchasing power would still weigh on households but the pain would be “less serious than originally feared”, the pollster said.