German Consumer Sentiment Logs Moderate Rise: GfK

Despite a sharp increase in income expectations, the recovery in German consumer confidence is rather moderate due to strong intentions to save rather than spend, a closely watched survey showed on Tuesday.

The forward-looking consumer sentiment index rose to -29.0 in March from revised -29.6 in February, survey conducted by the market research group GfK and the Nuremberg Institute for Market Decisions (NIM) revealed. The score matched economists’ expectations.

NIM consumer expert Rolf Burkl said a rapid recovery in consumer activity is not expected. The propensity to save had a dampening effect on the consumer climate, he noted.

Burkl observed that the outlook for the German economy has become increasingly pessimistic. Moreover, the government cut its growth projection for this year to just 0.2 percent.

Consumers will be willing to make larger purchases only when inflation comes under control and they regain confidence in the economy, said Burkl.

The economic expectations indicator rose only slightly in February as consumers see no signs of a sustainable recovery in the German economy.

The corresponding index climbed 0.2 points to -6.4.

On the other hand, the income expectations index advanced 15.2 points to -4.8 in February. This was the best value since February 2022.

The research group said significant wage and pension increases in conjunction with less rising prices will lead to noticeable real income increases.

However, the improvement in income expectations hardly supported the willingness to purchase. The propensity to buy index posted -15.0 compared to -14.8 a month ago.

The GfK said gross domestic product in 2024 is likely to be only just in positive territory.

Weaker consumption and moderate investment intentions among companies would be the factors responsible for the expected stagnation.