“Despite a strong economic headwind, the consumer climate has remained stable, holding steady at a strong level. Thus, the conditions are in place for domestic demand to fulfil its already previously stated function of serving as an important pillar for the already sluggish economy in the coming months” GfK noted.
Backward-looking data suggests a fast-deteriorating outlook, however. Economic expectations plunged to a near seven-year low in August, weighed on by concerns over ongoing trade wars, the global economic slowdown and Brexit-related uncertainty. Defying the overall downbeat trend, the propensity to buy rose in August and supported overall consumer sentiment, while income expectations remained broadly stable, reflecting still-healthy labor market dynamics.
Looking forward, all eyes are on the global political landscape and the domestic labor market. In its communique, GfK highlighted that “if in the future the labor market should become less stable and the threat of a significant increase in unemployment loom, the consumer economy would also suffer a significant setback”.
FocusEconomics Consensus Forecast panelists expect private consumption to expand 1.6% in 2019, which is unchanged from last month’s estimate. For 2020, panelists see private consumption growing 1.3%.