Consumer sentiment in Germany is improving at the end of the year: Income expectations and the willingness to buy show noticeable growth. The economic expectations are also improving slightly. In the forecast for January, the Consumer Climate rises to -25.1 points – an improvement of 2.5 points compared to the previous month (revised to -27.6 points). These are the results of the GfK Consumer Climate powered by NIM for December 2023. As of October 2023, it is published jointly by GfK and the Nuremberg Institute for Market Decisions (NIM), the founder of GfK. 

These figures show that consumer sentiment is improving again after a recent period of stagnation. A slightly higher consumer sentiment was last measured in August of this year, at -24.6 points. “It remains to be seen whether the current increase represents the start of a sustained recovery in consumer sentiment,” explains Rolf Bürkl, consumer expert at NIM. “Consumers still have major worries. Geopolitical crises and wars, sharply rising food prices and discussions around national budget for 2024 continue to cause uncertainty. As a result, the level of consumer sentiment is currently still very low.”

For a lasting upturn in the mood of consuming, it is necessary to address the causes of uncertainty and find a solution here. In concrete terms, this means that further steps must be taken towards price stability and solutions must be found to the various crises.

Income expectations stop downward trend

The positive development of the consumer climate this month is primarily based on income expectations. In December the indicator increased by 9.8 points compared to the previous month, therefore climbing to -6.9 points. A better value was last measured in July 2023, at -5.1 points.

One of the main reasons for the increased income optimism is certainly the significant growth that is expected in the most important income source for private households: wages and salaries, or pensions.

A more in-depth analysis recently carried out by the NIM confirms this: German consumers were asked why they expect their financial situation to improve. In this open question, around one-third of the respondents answered that recent or future wage/salary and pension increases are the reason for this positive assessment. It was by far the most significant reason mentioned. A number of other reasons were also given, such as job security or career changes/improvements, for example professional education coming to an end. However, approximately one in ten respondents also mentioned reducing expenses in order to make savings.

Willingness to buy with first signs of recovery

As the income expectations improve, the willingness to buy is also noticeably increasing: After a stagnation phase of around one and a half years, the indicator gained 6.2 points and now stands at -8.8 points. The willingness to buy was last higher in March 2022, at -2.1 points.

Despite the significant increase, willingness to buy is currently still below the level during the two lockdowns of the 2020/2021 Covid-19 pandemic. This fact confirms the current level of uncertainty among consumers, caused by the multiple crises.

Economic expectations are improving slightly

Economic pessimism among consumers continued to decline at the end of the year. The indicator for the economic expectations rises to -0.4 points. That is 1.9 points higher than in the previous month. Compared with the corresponding period of the previous year, the increase is just under 10 points.

Despite the slight increase, consumers are still very cautious about further economic developments in Germany. This is in line with views from the economy which are increasingly pessimistic about the prospects for growth in 2024. The current economic forecast for the coming year from the German Economic Institute (IW) expects a decline in gross domestic product of 0.5 percent.