We just got a big sign that ECB policy is finally doing its job

German consumer confidence improved substantially in April, pointing to the ECB’s increased package of monetary stimulus finally starting to do its job.

The headline consumer confidence figure from GfK came in at 9.7, up from 9.4 last month. It has been expected to remain at 9.4.

Here’s what GfK’s release alongside the survey said:

German consumer optimism improved distinctly in April. The overall index is forecasting 9.7 points for May, up from 9.4 points in April. Growth is being observed for both economic and income expectations as well as propensity to buy.

Consumers are clearly assuming that the German economy will regain some momentum in the coming months. Economic expectation rose accordingly in April. Income expectation and propensity to buy have both made noticeable gains, once again improving their already very good level.

The biggest jump in the month was in GfK’s propensity to buy survey — a reading given to indicate how likely German citizens are to buy goods instead of save. The score jumped by 5.4 points in April, climbing to 55.4 — its highest level since July 2015. Propensity to save amongst Germans also fell, falling to the lowest level in history. Those numbers are a big boost to the ECB, which has been trying to address the problem of flagging growth and inflation in the eurozone by encouraging spending with its negative interest rate policy and huge bond buying programmes.

Here’s GfK again (emphasis ours):

Propensity to buy can clearly benefit from the decision of the European Central Bank in March to re-open the monetary floodgates. The indicator rose by 5.4 points in April to reach 55.4. The last time the indicator recorded a higher value was in July 2015 when it stood at exactly 56 points.

The recent decisions of the ECB to lower the key interest rate to 0 per cent, to extend the bond buying program again, and to raise the penalty interest rate for banks that want to deposit money with the ECB caused propensity to save among Germans to fall to a new historic low in April. Conversely, propensity to buy increased. Saving continues, as before, to be an unattractive alternative, particularly given that, in the context of the interest rate decisions made by the ECB, there are increasing discussions about whether negative interest rates will also be applied to private accounts in the future

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