Consumer Climate in Germany continues its recovery in October. As both income expectations and the willingness to buy show an improvement for the second time in a row, and the willingness to save falls slightly, the Consumer Climate forecast also improves for the second consecutive month.
For November, the Consumer Climate is forecast to rise by 2.7 points to -18.3 points compared to the previous month (revised -21.0 points). This is the highest value since April 2022, although the level of Consumer Climate still remains low. However, German consumers are once again somewhat more pessimistic about overall economic development. This is shown by the latest results of the GfK Consumer Climate powered by NIM.
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The increased willingness to buy, and particularly the more optimistic income prospects, are the reasons for the continued recovery of the Consumer Climate. A moderate decline of 4.8 points in the willingness to save supports this positive development.
'Following the slight improvement in the previous month, the Consumer Climate continues to improve. It has climbed to its highest level since April 2022, when -15.7 points were measured after the start of the war in Ukraine,' explains Rolf Bürkl, consumer expert at NIM. 'But despite the increase, the level of Consumer Climate remains very low. The uncertainty caused by crises, wars, and rising prices is still very much present and is preventing factors that encourage consumption, such as real income growth, from taking full effect. Reports of a rising number of company insolvencies and plans to cut jobs or relocate production abroad are also hindering a more significant recovery in consumer sentiment.'
Negative trend in economic expectations continues
In contrast to consumer sentiment, German consumers are once again somewhat more pessimistic about economic development over the next 12 months. Their economic expectations have fallen for the third consecutive month. With a slight drop of 0.5 points, the economic indicator currently stands at 0.2 points. A lower value was last measured in March 2024 with -3.1 points.
The German government has also revised its forecast for economic growth downwards this year. Gross domestic product is now expected to fall by 0.2 percent.
Income expectations continue to recover
For the second time in a row, respondents are slightly more optimistic about their household's future financial situation over the next 12 months. The income expectations indicator increased by 3.6 points compared to the previous month, climbing to 13.7 points. Compared to the same period last year, the increase is a significant 29 points.
Falling inflation rates and significantly rising wages and salaries are currently driving real income growth. Pensioners are also experiencing a real increase in income.
Willingness to buy climbs to highest level since March 2022
Rising income optimism positively affects the willingness to buy. The indicator gained 2.2 points and now stands at -4.7 points. This is the highest level in more than two and a half years; the last time a better value was measured was in March 2022 with -2.1 points. The willingness to buy is therefore currently showing a slight upward trend, although the level is still very low. Additionally, further negative circumstances may arise in the coming months: unemployment and the number of company insolvencies have risen slightly recently, which may increase job concerns for employees. This concern can negatively impact the willingness to consume.
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