German confidence weakens as consumers increase savings - GfK

German consumer confidence weakened more than expected this month, data from market research company GfK revealed on Wednesday, as elevated interest rates cause people to hide money away in savings accounts.

The closely watched monthly gauge of forward-looking consumer confidence fell to -26.5 for October, down 0.9 points from a revised -25.6 in September.

Economists were expecting only a slight decline to -26.

GfK said that a number of sub-indices were moving in the right direction – with economic expectations, income expectations and propensity to buy showing minimal increases.

However, a significant rise in the propensity to save – up 0.5 point to 8, its highest level since April 2011 – was behind the decline in the headline index. Earlier this month the European Central Bank raised interest rates to a record 4.5% as it continues to battle stubborn inflation, which stood at 5.2% in the euro area in August.

GfK's consumer expert Rofl Bürkl said Wednesday's data shows that "the chances of a recovery in consumer sentiment this year have probably fallen to zero".

“The reasons for this are a persistently high inflation rate due to sharply rising food and energy prices. Private consumption will therefore not make a positive contribution to overall economic development this year.”

Economist Claus Vistesen from Pantheon Macroeconomics said that the rising inclination to save "add[s] to the picture of defensive consumer behaviour".

"The headline index is still well off its lows last year, but we see little evidence of relief in these data from falling inflation and signs that ECB interest rates have peaked," Vistesen said.