Inflation angst grips German consumers as blues ease in France

[August 26, 2022]  By Leigh Thomas

PARIS (Reuters) - Consumer morale in the euro zone's two biggest economies diverged starkly in August as French consumers benefited from fresh government measures while concerns over rising energy bills hit their German counterparts, surveys showed on Friday.

The French government introduced a series of measures aimed at helping the population withstand rising inflation over the past year, while households in Germany are facing higher energy costs after the German gas market operator set a levy from October to help utilities cover the cost of replacing Russian supplies.

France's INSEE official statistics agency said its consumer confidence index rose to 82 from 80 in July, above an average forecast of 79 in a Reuters poll of economists. That was the first rise in consumer morale in seven months.

Measures ranging from pension and civil servant pay rises to subsidised rebate on car fuel prices come after the government already introduced electricity and gas price caps last year ahead of presidential elections this April.
 

At 6.8% in July, French inflation remains the second lowest in the euro zone after Malta.

"Household confidence should keep improving in autumn thanks to higher incomes, which should allow for a slight improvement in purchasing power," said economist Sylvain Bersinger at French economics consultancy Asteres.

Consumer confidence also improved in Italy in August as the country gears up for an election following last month's collapse of Mario Draghi's government.

Consumer confidence in the euro zone's third largest economy rose unexpectedly to 98.3 from 94.8 in July, returning to June's level, Italy's national statistics institute ISTAT said on Friday. It came in far above a median forecast of 92.5 in a Reuters poll.

A banner reading "energy crisis, inflation, impoverishment = government failure" is put on a vehicle as people protest while German Chancellor Olaf Scholz visits a research laboratory at Magdeburg University, in Magdeburg, Germany, August 25, 2022. REUTERS/Fabrizio Bensch

In sharp contrast, a survey on Friday showed German consumer sentiment is projected to hit a record low for the third month in a row in September as consumers brace for ever higher energy bills.

The survey from the GfK institute showed its consumer sentiment index falling to -36.5 heading into September, against expectations in a Reuters poll for a reading of -31.8.

The institute said German consumers were having to put aside money for future energy bills and that the situation could worsen if winter gas shortages pushed prices even higher.

German households, already grappling with the prospect of gas levies, may be asked to foot an even greater bill in the current energy crisis, said Hauck Aufhaeuser Lampe chief economist Alexander Krueger, further weighing on consumer spending in Europe's biggest economy.

"What should be clear is that the coming recession will be fuelled primarily by consumption. Since the government caused the gas debacle, it should provide much more relief than it is currently signalling," he said.

(Reporting by Leigh Thomas; Additional reporting by Benoit Van Overstraeten in Paris, Miranda Murray and Christian Kraemer in Berlin and Gavin Jones in Rome; Editing by Ana Nicolaci da Costa)

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