Improvement in consumer sentiment persists, yet uncertainty remains substantially elevated - Improving consumer sentiment persists, yet uncertainty remains elevated
German Consumer Sentiment Improves Slightly Amid Economic Uncertainty
German consumer sentiment is witnessing a minor uptick despite lingering economic uncertainties, according to a monthly survey conducted by GfK and NIM. The consumer climate index, an indicator of total private consumption, is expected to rise to -19.9 in June from -20.8 in May, marking the third consecutive monthly improvement.
Rolf Büрkl, a consumer expert at NIM, attributes the continued low sentiment to unpredictable trade policies in the USA, market volatility, and economic weakness in Germany. However, there is a silver lining. Income expectations of those surveyed for the consumer climate rose significantly, reaching 10.4 points—the highest value since October 2024—while the economic expectations index climbed by 5.9 points to 13.1 points.
Despite the promising increase in economic and income expectations, the willingness to buy decreased slightly, dropping to minus 6.4 points in May. Consumers seem to be adopting a cautious approach in view of the current economic situation, preferring to save rather than spend, as the savings propensity rose by 1.6 points to 10.0 points.
Approximately 2,000 consumers were interviewed between April 3 and 14 for the survey, which covers retail, services, travel, rent, and health services. The consumer climate index gauges total private consumption expenditure in Germany, highlighting the overall economic health of the nation.
The improvement in the German consumer climate index, albeit minor, suggests a potential positive impact on the employment scenario within EC countries, given that it's an indicator of total private consumption. With income expectations reaching their highest value since October 2024, businesses may observe a slight increase in customer spending, contributing to employment opportunities. However, the cautious approach of consumers towards spending, as reflected in the drop in the willingness to buy and rise in savings propensity, might hinder robust employment growth in the short term.
