BERLIN: German consumer sentiment looks set to tumble in the last month of the year as households, worried by reports of job cuts, grow more pessimistic about their income prospects, a survey showed on Wednesday. The consumer sentiment index, published by GfK and the Nuremberg Institute for Market Decisions (NIM), fell significantly more than expected going into December, to -23.3 points from a downwardly revised -18.4 points the month before.

Analysts polled by Reuters had expected a reading of -18.6. The December figure marks the lowest point for consumer sentiment since May, when it was -24 points, and is similar to levels seen at the end of last year when Germany’s economy was contracting.

“The last few weeks of the year are ending with a significant setback in the consumer climate,” said NIM analyst Rolf Buerkl. “The reasons for this are certainly the job cuts reported by industry and the relocation of production abroad. In addition, the number of bankruptcies has recently increased,” he said. Big-name companies, such as Bayer, Volkswagen and Thyssenkrupp, have announced job cuts in recent months as Europe’s largest economy has struggled to recover. Consumers’ initial hopes for an economic recovery have dissipated over the year, with year-ahead expectations declining for a fourth month in a row to its lowest since February, the survey showed.

The improvement in consumer sentiment throughout this year was nearly all wiped out in December, said Melanie Debono, senior Europe economist at Pantheon Macroeconomics. “We expect consumer confidence to rebound once the political picture at home settles down,” Debono said. “After all, real disposable incomes will continue to recover, as wage growth continues to outpace inflation.”

Germany’s government has forecast a 0.2 percent economic contraction in 2024, marking a second year of decline and cementing Germany’s place as a laggard among its large eurozone peers. The collapse of Germany’s fractious ruling coalition earlier this month, paving the way for snap elections in February, has increased uncertainty and could bring more economic pain in the months ahead.

In view of the uncertainty, private households are saving more, said DIW economic expert Laura Pagenhardt. The DIW economic barometer fell this month to 83.7, moving further away from the neutral mark of 100, the economic institute said on Wednesday. “The ever-increasing uncertainties are poison for German industry,” Pagenhardt said. — Reuters