German consumer sentiment hits new low amid energy bill woes

German consumer sentiment is expected to fall to a record low again in September amid worries about rising energy bills, according to a survey released on Friday.

GfK’s headline advance consumer confidence index declined to -36.5 from a downwardly-revised -30.9 in August, coming in below consensus expectations of -31.8.

The propensity to buy index fell 1.2 points to -15.7 in August, while the income expectations index ticked up to -45.3 from -45.7 and the business cycle expectations index rose to -17.6 from -18.2.

GfK consumer expert Rolf Buerkl said: "The sharp increase in the propensity to save this month means that the consumer sentiment is continuing its steep descent. It has once again hit a new record low.

"The fear of significantly higher energy costs in the coming months is forcing many households to take precautions and put money aside for future energy bills. This is further dampening the consumer sentiment, as in return there are fewer financial resources available for consumption elsewhere."

GfK said the situation could become even worse in the coming weeks and months if the supply of fuel, in particular gas, is insufficient in the cold season. This would further increase prices and drive heating bills up.

"For a sustainable recovery of the consumer sentiment, inflation must be combatted, for which the European Central Bank (ECB) in particular is required to adopt a less expansive monetary policy," it said. "On the other hand, steps must be taken to find a solution to one of the main causes of the high prices, namely the war in Ukraine."

Pantheon Macroeconomics said: "The energy levy coming in October, which will see bills rise, will do little to help alleviate the squeeze on consumers’ real incomes or deter further saving, especially if it offsets the impact on household finances from the recent fuel duty and energy VAT cuts and lower transport costs.

"We expect household consumption to have fallen in Q3 in Germany."