Market Analysis

German consumer sentiment is expected to decline sharply as September approaches, driven by rising unemployment, job cuts, and increasing insolvencies, which are eroding income expectations and delaying hopes for a stable economic recovery, according to a survey released on Tuesday.

The consumer sentiment index, published by GfK and the Nuremberg Institute for Market Decisions (NIM), dropped to -22.0 points heading into September, down from a slightly revised -18.6 in the previous month and below the forecast of -18.2.

A sharp decline in income expectations led to an overall drop in sentiment, with the index falling to 3.5 points from 19.7. The increase in purchasing power experienced by many households was insufficient to counterbalance the rising uncertainty in the labor market.

The brief recovery observed in August was largely attributed to the European Championship, noted NIM consumer analyst Rolf Buerkl.

"Slightly rising unemployment figures, a surge in company insolvencies, and staff reduction plans at several companies in Germany are causing many employees to worry about their jobs," said Buerkl, dampening hopes for a sustainable economic recovery fueled by private consumption.

Unemployment increased more significantly than usual at the start of the summer break, while economic institutes have forecasted a rise in corporate insolvencies. Additionally, a series of job cuts have been recently announced by companies such as Deutsche Bahn, Bayer, and ZF Friedrichshafen.

Paraphrasing text from "Reuters" all rights reserved by the original author.