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German Confidence Sinks as Propensity to Save Rises

Consumer confidence weakens for Germany, UK regulators approve Equinor developments, and today's data.

German consumer confidence showed signs of weakening further this morning, slipping to -26.5 pts from last month’s -25.6 pt print. This came lower than market expectations and is indicative of the headwinds that German consumers continue to face in light of monetary tightening, elevated inflation and economic downturn. While this was the lowest the GfK Consumer Confidence index had hit since April, the survey showed that income expectations were stabilising.

Nevertheless, despite income expectations stabilising, the report noted that high levels of inflation – particularly in relation to food prices – are continuing to negatively impact the purchasing power of private households. As such, GFK noted that the propensity to buy remains at a very low level, with the index at -16.4, hovering roughly around its lowest level since the 2008 GFC. With the propensity to buy falling, the propensity to save has risen, climbing 8pts to its highest level since April 2011, as households across Germany look to insulate themselves from any further economic headwinds down the line.


Sticking with savings, more generally, it’s worth noting that Germany’s private sector gross savings levels are also monitored closely given their relatively high levels. For example, between 2010 and 2019 private sector gross savings averaged 25% as a percentage of GDP, well above the US’ 22% and the UK’s 15%.

When looking at saving’s rate in relation to households, in March 2023, EUROSTAT recorded that it had risen marginally to 20.03%. To give this some context, the same survey showed Italy at 9.64%, Slovenia at 12.93% and France at 17.83%. Germany thus topped the chart and came well above the eurozone average of 14.16%.

Citing concerns around inflation, the GFK report argued that “to significantly improve domestic demand, it is absolutely necessary that the inflation rate is brought back to a tolerable level. For the Euro-countries, the European Central Bank is aiming for a rate of around 2 percent. It is not yet possible to predict when this rate will be reached.”

All eyes now turn to Eurozone consumer confidence, released tomorrow at 1000.

Equinor Given the Go Ahead for Rosebank Project

This morning has seen UK regulators approve plans for the Norwegian energy giant Equinor to develop its Rosebank oil and gas project. This field is found around 80 miles off the Shetland cost, with Equinor expecting that the field will produce some 300m barrels of oil over its lifetime.

Earlier this summer, Rishi Sunak has announced a major increase to the number of licenses for North Sea oil and gas. Here, the Government’s stated that “investment in the North Sea will continue to unlock new projects, protect jobs, reduce emissions and boost UK energy independence” with hundreds of new licenses being granted. Downing Street maintained that the plans would help protect more than 200,000 jobs in the industry, (though this is the total amount of people employed in the oil and gas industry across the UK).

Sunak’s commitment stand in stark contrast to Sir Keir Starmer’s pledge to end North Sea oil and gas exploration. In June, Labour confirmed it would “not grant licences to explore new fields”. Labour did however confirm that it would honour any licences in existence at the time of the next election.

Upcoming Data

Today is a little light on data, however at 1330, attention will turn to the US’ Durable Goods Orders. This comes ahead of the UK’s Nationwide House Price Index, Eurozone consumer confidence, US GDP and PCE figures all released tomorrow.

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