German Consumer Confidence Beat Gives Glimmer That Domestic Demand Will Underpin Growth
October’s German GfK consumer confidence survey came in better than expected but unchanged from September’s showing, remaining at a 10-month low. The survey came in at 5.2, higher than consensus forecasts for 5.0, marking the lowest reading since November 2010. The marginally better than expected showing allows for a glimmer of hope that consumer confidence is holding up modestly better than expected, however, as the storm clouds gather over global growth in Q4 we expect continued deterioration.
After yesterday’s better than expected, but steadily declining, IFO showing, which was accompanied by some downbeat comments from IFOs Abberger today’s Gfk consumer confidence survey only served to underscore the deterioration taking place at present in Germany. While the breakdown to yesterday’s IFO numbers generally confirmed the headline decline the wholesale and retail trade numbers did show some resilience, offering a morsel of hope that domestic demand will help support the slowing German economy.
As global trade slows amid a softening global economy lowering demand for German exports, economic growth will need to be underpinned by domestic demand; not something you can always count on in Germany. Despite very healthy labour market trends German citizens have always been very wary spenders and prefer to save hefty portions of their incomes. The result is that domestic demand in Germany and retail sales have always been on a low ebb, doubly so as a period of economic uncertainty knocks at the door of the EMUs largest and most robust economy.
The euro embarked on a very short-lived rally in the aftermath of the slightly better than expected showing, the move was quickly reversed. Euro traders remains on tenderhooks early in European trade as loose, but not detailed, talk of policies to help the ailing euro-region continues. With some hope emerging from the fact that officials are working toward a solution, but aggressive buying not warranted due to the lack of details the market remains in something of a holding pattern as it consolidates its drop off last week.
The period of consolidation is allowing over stretched technical barometers to move back from oversold levels. After several weeks of US Dollar strength currencies had been screaming for a pullback, before extending their declines, as the market awaits fresh cues, technicals are unwinding paving the way for the next leg lower. For a full technical outlook.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.