The latest data for January reveals a positive trend in consumer confidence in Germany, with a notable increase in income expectations. Despite a subdued economic outlook, Germany’s forward-looking consumer-sentiment index is forecasted to improve to minus 25.1 in January, compared to minus 27.6 in December. This surpasses economists’ expectations of an improvement to minus 27.0.
While this improvement is encouraging, it remains uncertain whether it signifies a sustained recovery in consumer sentiment. Rolf Buerkl, a consumer expert at NIM, notes that consumers still harbor concerns about geopolitical crises, escalating food prices, and national budget discussions for 2024. Consequently, consumer sentiment levels remain relatively low.
However, the three subindexes used by GfK to determine the overall sentiment figure for January all showed positive growth. Income expectations experienced a substantial increase, rising from minus 16.7 to minus 6.9, driven by heightened optimism regarding wages and pensions. The willingness to make purchases also saw an uptick of 6.2 points to minus 8.8, suggesting ongoing consumer uncertainty during COVID-19 lockdowns. Furthermore, the measure for willingness to save improved, registering a positive reading of 7.3 compared to 5.3 previously.
Nevertheless, German consumers continue to face challenges due to a stagnant economy and uncertainty surrounding the government’s budget for the upcoming year. The Bundesbank, Germany’s central bank, expects a contraction in the economy during the final quarter of this year and predicts sluggish growth of 0.4% for 2024 as a whole.
It will be crucial to monitor whether this positive momentum in consumer confidence can be sustained amidst ongoing uncertainties and challenges.