German consumer sentiment set to drop in April - GfK

German consumer sentiment is expected to deteriorate in April, according to data released by market research group GfK on Tuesday.

GfK's forward-looking consumer sentiment index fell to 10.4 from a revised 10.7 the month before, missing expectations for a reading of 10.8.

Meanwhile, the economic expectations index rose seven points in March to 11.2 and the indicator for income expectations declined to 55.9 from 60.0 the month before.

GfK said: "We nevertheless assume that consumption will be an important pillar of economic development in Germany this year too. However, this is reliant on the assumption that the uncertainty caused by Brexit and the trade conflict does not increase further. Above all, any encroachment of this uncertainty on job market expectations should be avoided. This is because when workers get the impression that their job is no longer quite as secure as it was, they also become more cautious when it comes to their spending.

"Whilst consumers are certainly not assuming that Germany will fall into recession this year, they do see a noticeable cooling off of economic activity."

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said this was a disappointing headline, almost fully reversing the rebound since the start of the year.

"The advance aggregate index, however, is generally a poor leading indicator for consumption. The details, reported for March in this release, are better, and they were mixed this month. The main business expectations index rebounded strongly, partly reversing its recent string of declines, while the indices for income expectations and households’ willingness-to-buy fell. The willingness-to-save gauge improved slightly.

"Overall, this survey continues to signal a rebound in growth of consumers’ spending in coming quarters, from a sharp slowdown in the past three-to-four quarters. For that to happen, however, the savings rate has to stop climbing at its present rate. The savings rate shot higher in 2018, by almost a full percentage point to 10.7% in Q4, the highest level since the peak of the financial crisis in 2008. We doubt that it will increase at this pace for much longer."