Germany: Happy consumers in a sinking economy? How is it explained?

The country's index of confidence in the services sector strengthened, although it fell in almost all other Eurozone countries

$ΓερμανΙα: ΧαροΙ&mu ;εοιανλσεοιο&mu αουιζεεετι /> Photo: AP Some of the Eurozone's optimistic consumers can be found in one of the weakest economies in the region, Germany. This paradox became apparent last Tuesday, when Germany was the only major Eurozone member to see its GDP shrink in the second quarter. However, data from July showed an even bigger improvement in German consumer confidence. Sentiment in Europe's largest economy is only a fraction of what it was in February 2022, shortly after Russia invaded Ukraine. Neither France nor Italy are close to Germany's levels. This dissonance between high levels of consumer optimism and the shrinking German economy is partly explained by rising wages. “The increase in real wages has played a role in this. Consumer confidence is not as strong as it was before the pandemic, but purchasing power has increased,” said Christian von Berg, chief economist at Coface. The combination of rising wages and decelerating inflation has been felt. In the first quarter of 2024, German workers saw a historic increase in real wages, the largest since data began to be released in 2008. But other indicators also showed improvement in July. The country's index of confidence in the services sector strengthened, although it fell in almost all other Eurozone countries. GfK, whose consumer sentiment index improved last month, expects a better outlook for wages and slightly higher purchasing power. Another factor is the impact of the European Football Championship, which Germany hosted for a month starting on June 14. Thousands of fans from across the old continent descended on Berlin, which was estimated to have 2, 5 million visitors. At the same time, Taylor Swift's seven concerts boosted consumption, but did not dramatically boost growth. However, whoever the reason for the improving consumer climate in Germany, the issue is that it will not be able to survive in a shrinking economic environment. Because beyond the Soccer League and Swift's tours, there are certainly limits to how much businesses can raise in a weakened economy. Today's number of bankruptcies is the highest since the summer of 2016. Falling industrial production in Germany may have made it harder for businesses to keep raising wages, threatening today's improving consumer sentiment. <noindex> <div class=$ Source: www.kathimerini.com.cy

Germany: Happy consumers in a sinking economy? How is it explained?

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The country's index of confidence in the services sector strengthened, although it fell in almost all other Eurozone countries

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