Dow Jones Newswires: German consumer sentiment expected to drop to new record low in September

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Consumer confidence in Germany is set to fall in September to an all-time low, as propensity to save increases amid fears of higher energy costs.

Market research group GfK’s forward-looking consumer-sentiment index forecasts confidence declining to minus 36.5 in September from a revised figure of minus 30.9 in August. September’s figure is below a forecast from economists polled by The Wall Street Journal of minus 31.8.

Since the collection of data for the whole of Germany started in 1991, the current value is the lowest that has ever been measured.

“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,” GfK’s consumer expert Rolf Buerkl said. He explained that this is dampening consumer sentiment, as in return there are fewer financial resources available for consumption elsewhere.

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

GfK uses data from subindexes from the current month to derive a sentiment figure for the coming month. While the propensity to buy has only suffered a slight decline in August, both economic and income expectations show minimal gains. However, this is being overshadowed by the sharp increase in the propensity to save in August, which has driven the decline of the headline index.

The Germans’ propensity to save increased by a whopping 17.6 points in August, climbing to 3.5 points, the highest value in more than eleven years, GfK said.

Propensity to buy has only suffered a slight decline, falling to minus 15.7 in August from minus 14.5 in July. This is the seventh consecutive decline and the lowest reading since October 2008, amid the 2008-09 financial crisis.

After two declines in a row, economic expectations are stabilizing this month, rising slightly to minus 17.6 from minus 18.2 in July. Despite the slight improvement this month, the risk of a recession remains high from the perspective of German consumers, the report said.

After income expectations reached a record low in the previous month, they increased slightly to minus 45.3 in August from minus 45.7. Persistently high inflation rates are currently weighing heavily on the income indicator, GfK said.

For a sustainable recovery of German consumer sentiment, inflation must be combated, for which the European Central Bank is required to adopt a less expansive monetary policy, Mr. Buerkl said.

Write to Maria Martinez at maria.martinez@wsj.com

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