Russia Sanctions Hit German Consumers, “Economic Expectations Completely Collapse”

Wolf Richter's picture

It starts out un-alarmingly. The optimism of German consumers weakens somewhat, according to the forward-looking Gfk survey, conducted on a monthly basis for the European Commission. So the overall index fell to 8.6 for September, from 8.9 in August. It was the first decline since January 2013.

The index bottomed in late 2008 below 2, after a breathtaking crash during the financial crisis. In late 2007, it had hovered above 9. Early 2014 was the first time since the prior bubble that the index broke above 8. And August’s level of 8.9 represented an “extremely optimistic economic outlook,” as Gfk calls it. German consumers have been feeling good, and according to the headline index, they’re still feeling good up there somewhere in the rarefied air above 8.

But beneath the surface, there is serious trouble. Gfk reports that the sub-index of economic expectations, “in light of the intensified state of international affairs, completely collapses.”

It plunged 35.5 points to 10.4. The worst monthly plunge since the beginning of the survey in 1980. In a single month, it nearly wiped out all the gains of the boom of the last 12 months. Gfk cites the escalation of the situation in Iraq, Israel, the Eastern Ukraine, and particularly “the faster rotating sanctions spiral with Russia.”

Since there appears to be no sustainable solution to any of the trouble spots, consumers are showing increased uncertainty about the possible consequences for the German economy, Gfk reports. “Particularly the sanctions against Russia, which have already hit exports noticeably, could become a real danger for the German economy.”

The two sub-indices for income expectations and propensity to spend have been spared so far this type of brutal collapse, though they both fell from their lofty perches. Income expectations hit an all-time record in August. But for September, the index dropped 4.6 points to 50.1. The propensity to spend dropped 1.7 points to 49.3. At these levels, both are  still “relatively robust.”

Gfk credits “the continued stable domestic conditions, stable employment levels, good income development, and low inflation” for limiting so far the impact of collapsing economic expectations on income expectations and the propensity to spend.

ECB President Mario Draghi, along with inflation mongers in the new French government, at the Fed, on Wall Street, and elsewhere should take note: inflation, as the report points out repeatedly, is important to Germans. Watch what happens to German consumer attitudes – and spending – if you steal their income and scarce savings one bite at a time.

But dark clouds have already appeared over German consumer spending: Gfk cites the increase in the propensity to save in August as “the first indicator that the consumer will be more careful in the future and that the impulses for the propensity to consume could decline.”

For this still “relatively robust” propensity to spend to continue, “it is necessary from the consumer’s point of view, that the situation in the crisis regions does not escalate further, but that sustainable solutions are found.” Gfk then warns: “If domestic conditions deteriorate significantly in the wake of a possible further escalation, difficult times loom ahead for the economy.”

Given the new economic malaise in Germany [Sanctions Are Eating their Lunch: Russian CEO Begs for Bailout, German Economy Swoons], any decline in consumer spending, which grew at a measly 0.9% last year, could wreak real havoc, not just in Germany, but also in its most critical trading partner France, in Italy, and other struggling economies in the Eurozone. German consumers are infamous for closing their wallets. And if they do it again, after they finally started spending more, they’d quickly prick any remaining hopes for a “recovery” in the Eurozone.

Even the folks at the German Ministry of Finance very belatedly admit that the sanctions spiral caused Germany’s current economic swoon, as if they’d finally found my site where I’ve been explaining this to them with utmost patience for months. Hilarity ensued. Read….  This Is what Happens when otherwise Competent, Diligent, and Hard-Nosed Bureaucrats Fail to Read my Stuff

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novictim's picture

Dear Mother Russians,

Ukraine has now built several atomic bombs on the order of 500kiloton potential.  Fusion devices are in production phase.

Sleep well tonight.

fukidontknow's picture

It'll be the Ukrainians who won't be sleeping well when they realize what an unreliable partner the west is - i.e. the west will let Putin smash them and he'll let the west have a go in Syria. I doubt that the Poles will learn anything from it though. 

talisman's picture

your post is 500 kilotons of pure shit

petkovplamen's picture

Same as how Iran has been building the bomb for the past 10 years? Or is it the same as how Saddam had been building imaginary weapons of mass distraction?

Otrader's picture

The banking elites are paid regardless of what happens to the German people.   Just look at what's happening in the USA with these bankers.  No one is concerned becuase they're looking at their mutual fund returns on a weekly basis.


   "The few who understand the system, will either be so interested from it's profits or so dependant on it's favors, that there will be no opposition from that class." — Rothschild Brothers of London, 1863

Reptil's picture

of course the sanctions are a double edged sword.
a number of european economies rely on trade. percentage wise more than the american one. there's been a positive trade balance in Germany and the Netherlands.
all that is up for grabs.
the irony of giving up constitutional laws to sign a trade deal with the USA elite (TTIP) in the near future (so outside corporations can decide the terms of the economic direction), after trade with the BRICS has been fucked on the basis of accusations without merit, is becoming more visible every day. The german industry movers (medium sized corporations) understand that their business is being fucked. The financial economic "top" want to turn the whole continent, the western world into a sort of Greek situation. The european "angle" is as such: They seek to gain a more centralised (european) role, and to do that they need diminished local economies. Van Rompuy said so in his "Interim Report". I suggest you read it, since it's pretty interesting.

And this crap to put a stick in the wheel of global trade with the BRICS, that's is what is in the interest of both the U.K. and the USA. elite. Nothing has changed for the past 100 years in that respect.
Webster Tarpley is a socialist, from a humanist POV, but he's spot on, calling the geo-political historical perspective:
This time they teamed up with beforementiond EU burocrats, and multinational corporations, as well as the neo-cons of NATO and want to take it further. In order to "reshape" they first want to disrupt the existing ties. We ain't seen nothing yet. Endgame if in full motion. A failed false flag every few months doesn't mean they'll back down and reposition. They'll play the Ukraine angle because they think they have the population in check.
In the Netherlands the CEO of Shell has openly said the sanctions are not doing any good.
I guess they're seeing now where the wind blows from. A cold war wind with low flying IMF faeces.
It's not about profit, it's about control over a marketplace.
And germans understand this very well.

ThisIsBob's picture

In all fairness our President did say there would be "costs."

Reptil's picture

The issue is of course: at whose costs? Shove it down the throats of the bewildered population that still think they're in a "social democracy" and Bob's yer unkle. :-)

Jack4952's picture

Germany needs Russia: for natural gas and oil; and to buy German-made products.

The middle-classes in the U.S., Canada amd most of Europe are either DEAD or DYING, while the middle-class in Russia is expanding at a very rapid rate. Germany's FUTURE markets lay to the EAST, as do the natural resources it needs.

Despite Germany's psychological and monetray dependence on the West (primarily the U.S. and British banks). soon a German leader with foresight, vision (and a great deal of courage) will repudiate the U.S. foreign policy, withdraw from NATO, and join the new monetary union being created by China and Russia.


petkovplamen's picture

It's true. I met many Russians in Thailand who were there to buy apartments. The Russkies are damn rich now.

SAT 800's picture

And it needs NATO, and Obama's "strategy"; like it needs herpes.

HYPERTlGER's picture

The German trade surplus is powered by all the trade deficits.

When the slaves in the mud brick pits or net producers at the bottom of the hierarchy are taxed/whiped into skeletons to supply the demand of the masters and servants or net consumers at the top of the hierarchy.

The surplus enjoyed by the master race at the top from the slave race in deficit at the bottom...vanishes.

Sorry but the Universe sustains teh Universities.

The Universities do not sustain the Universe.

All teh economic zones in deficit being imploded down towards absolute 0 = power plants.

Germany in surplus being exploded up towards absolute 1 = the light bulb.

The power plants are the supply of power.

The light bulbs are the demand for power.

But all of you have been brainwashed to believe that the rich light bulbs are the supply of power and the poor power plants are the demand for power.

It can funny or sad when It is realized how absolutely ignorant you all are. 

Germany along with the EU and the rest of the ignorant population of the global systsem are doomed...

In the end or logical conclusion/final solution of the take more power than you give all annihilate each other attempting to reacquire what you never had to begin with or acquire what you never will.

freedom from Truth.

Reptil's picture

I think the germans are indeed stuck with the euro. But that will change when it's a drain instead of a profit agregator. It's a simple weighing of cost-benefit, in medium to long term strategy.
Not everyone in europe is that stupid. Especially in Germany and the other german language speakers Austria even more so, as well as  Spain and Italy.
The population of the Netherlands has been subjected to a huge propaganda blitzkrieg, even more so than other countriies it seems.
But there are fissures in the construct.
The'll flip. They have no other chance.

HYPERTlGER's picture

The 1944 bretton woods global trade agreement reached maximum potential inflation in 2008...that is where the USA as the power supply to bretton woods reached maximum potential and began collapsing...the inflation up during the roaring 6 decades is turning into the deflation back down.

All the nationalist economic slave zones are like the watertight compartments on the the USA deflates to oblivion...The supply of inflation out of the USA into the rest of the world is being cut off...and the inflationary bubbles are popping.

Russia and China are not cutting themselves off from The USA...they are being cut off from the inflation from teh USA...because it's game over for the USA.

Yield rates have been dropping for 33 years now.

The net consumers of yield have been imploding the net producers of yield down towards absolute 0 to power the explosion of the net consumers of yield up towards absolute 1.

we are approaching the singularity point...where the positive phase of the lie you all believe is Truth ends and is revealed to have been a lie during the negative phase.

The polarity shift.

All of you are the noise or visible chaos effect powered by the invisible order of the cause or signal hidden behind.

The invisible order or reality of the basic systsem operating in the background powers the visible chaos of the graphical user interface or fantasy believed to be reality in the forground.

Real economics powers the fantasy economics you all believe is real economics.

SAT 800's picture

More or less; hits the important macro themes that are playing out.

damicol's picture

Germany is still run by Nazis.

 Except they now live in Washington, London, Brussels Switzerland and Tel Aviv.

I can still see the strings though, you just need to look backwards through a mirror and you can see them all

mtl4's picture

Nazis are not the same as vampire squid however they both suck for different reasons.  

Perfecthedge's picture

I lived in Germany and there are still a lot of people with Nazi mentality running the show (Corporations / Government / Banking).  Make no mistake, they still dream of the 4. Reich.  Not so much the younger generation - they dream of Beer, Bayern Munich and Mallorca.  Pretty lazy too.

Sandmann's picture

You must have lived in an asylum.

fibonacci's claus's picture

Putin unzips and pulls out the meat hog.  Merkel looks back at him with suprise and amazement.  Her white milky thighs aching with anticipation.  Her moist wafting essense beckoning his commie dog.  


get ready for the hot beef injection  ":)

Merkel:  "yeeeeeaw!  yeeaw!  Das fantastisch heir commie dog!

Perfecthedge's picture

I would rather fuck a Siberian bear in the mouth than touching Merkel.  The thought sends shivers down the spine.

sun tzu's picture

She might have been a looker 100 years ago


Nevermind. I googled it and you're right

Jano's picture

German people have to take the weapons and fight out of the country the US Army and US Airforce.

Germany is still occupied and run by occupying forces US and UK.

Germany should take the Nuclear umbrella from Russia and China and throuw out those Tel Aviv preotrians in UK and US.

limacon's picture

There is a long history of close contact at top levels between Russia and Germany . Do not be surprised at an entente cordial .

Note that Merkel keeps a portrait of Catherine the Great on her desk .
She and Putin probably met in the old DDR . Putin was stationed there early in his career .

Obamanism's picture

Putin would be more comfortable speaking German ( with an Ossie accent) than speaking English

Obamanism's picture

Putin would be more comfortable speaking German ( with an Ossie accent) than speaking English

ebworthen's picture

Good stuff Wolf, enjoy your posts.

The Germans are going to have to decide how important their relationship with the U.S. really is.

We're a good export market, but I'd wager Russia and China would be that much better.

And do they really need the U.S. Military there any more?  I don't believe so.

I don't see the Russian Federation as having aspirations beyond Ukraine.

The U.S., Poland, and the other Baltic states are acting as if it is 1959.

basho's picture

" don't see the Russian Federation as having aspirations beyond Ukraine."


do you see NATO, neocon-ussa as having aspirations beyond Ukraine?

you've got your history backward, mate.

stay away from MSM for a start.

not exceptional but std. ami thinking

ebworthen's picture

I think Russia realizes they are better off pursuing trade versus militarism.

I don't think the U.S.A has figured that out - other than selling out their own populace and sending them off to pointless wars.

"Neocon" is a misnomer that perpetuates the false left/right paradigm; have the Progressives got us out of foreign entaglements - or perpetuated them?

starman's picture

Euro recession in 1 2 3.................

CuttingEdge's picture

Err...I think depression is more likely.

bardot63's picture

Angela's Deutschland is the poster child for wheelbarrows of money and hyperinflation.  Do you think she wants to go down in history as never having learned history?  She's a lot tougher and a lot smarter than most credit her for.  I think she's had it with Barry O's bullshit and won't mind at all finding some new partners in Russia and China to party with. 

nobodyimportant's picture

Agree but she needs to act ASAP

basho's picture

she doesn't 'act'.

she must be pushed from place to place.

obummer does the pushing.


Freddie's picture

She is controlled by the Red Shield in Berlin and Frankfurt.  Who do you think was behind all those wars to wipe out the best young German men?   They create those wars to murder off the best and brightest and for money.

She will do what she is told but Obama=Soros will wipe out Europe's economy.  Putin did not start any of this.

Why they hate Putin:

He talks about how his mother secretly had him baptized.  His father was a loyal communist and would not have approved.

RafterManFMJ's picture

They create those wars to murder off the best and brightest and for money.

VERY good.

You kill off the brave, the duty-bound, the patriotic via war. You throw the nations of the world at each other to breed a more docile group of survivors.

Look at the pathetic joke the Englishman has become (and the American, not far behind).

Foxes cannot be tamed. Until they were.

"In 1959, a Soviet geneticist named Dmitry K. Belyaev began somewhat secretively experimenting with breeding domesticated foxes. More than five decades, thousands of foxes, and one collapse of the Soviet Union later, the program continues at The Institute of Cytology and Genetics at Novosibirsk, Siberia. Belyaev wanted to unlock the secrets of domestication, the links between behavior and breeding and physical traits, but plenty of non-scientists are aware of the project for a different reason: foxes are adorable, and we want to hug them, and we want them to like it.

SmittyinLA's picture

I bet all those Syrian Ukrainian refugees are pushing up rents and taxes and pushing down wages, that's gonna get worse too

SmittyinLA's picture

Wow, how will an EMP effect the German Economy? 

Seriously its coming and then things get worse 

q99x2's picture

Joe Biden's son comes to mind: The face with a beard growing on it. The Germans have to suffer to keep that beard trimmed just right.

Wahooo's picture

That's a good way of looking at it. Biden's son gets her Mercedes, Uke hookers, blow, and physical, while Germans suffer. I hope they kick out our military, leave NATO and join with the Federation.

atthelake's picture

If Angela wants to be reelected, she'd best ditch NATO and the bribes she's receiving from America's corrupt politicians.

whidbey-2's picture

THE BEGINNG is slow to gather dtream. but it is true, Germany is sometghing else. It is a new state within the IU.

whidbey-2's picture

THE BEGINNG is slow to gather stream. but ot is true Germany, is somethinging else/ today.  I think it becomes a private state, to hell with the EU,

Buster Cherry's picture

Gonna be a cold cold winter.

AdvancingTime's picture

At this point Putin holds all the cards, this will become more obvious as winter nears and events unfold.  It seems both Russia and many of the separatist in Eastern Ukraine would support federalization. Surely, no reason exist for Kiev to be opposed other than a loss of power. A more federalized government is also the most plausible way of keeping Ukraine intact.

Support for sanctions is mixed in Europe as some countries fear Russia and have an ax to grind with Putin while others wish to move forward. Saber rattling has only lead to death and destruction.  As I see it little good will come from further bloodshed and it is time for the West to stop sending money to Kiev so they can ramp up the violence and continue the civil war. More on the progress being made in the article below.