Consumer sentiment in Germany improved noticeably in July. Income expectations increased significantly and both economic expectations and the willingness to buy rose moderately. The willingness to save on the other hand, is virtually unchanged. Due to these developments, the Consumer Climate is currently able to recover significantly: In the forecast for August, the indicator rises by 3.2 points compared to the previous month (revised -21.6 points) to -18.4 points. These are the current findings of the GfK Consumer Climate powered by NIM, which has been published jointly by GfK and the Nuremberg Institute for Market Decisions (NIM), the founder of GfK, since October 2023.

This month’s Consumer Climate index is benefiting above all from a significant rise in income expectations and a moderate increase in the willingness to buy. The willingness to save, on the other hand, remains unchanged and is not contributing to the rise of the Consumer Climate.

“The upswing of the Consumer Climate in July is primarily due to Germans’ increased income expectations. However, the euphoria triggered by the European Football Championship in Germany in many parts of the population is also likely to play a role here.” explains Rolf Buerkl, consumer expert at NIM. “However, it remains to be seen whether this effect is sustainable or just a short-term flare-up. As quickly as this good mood has occurred, it can also disappear again. If the latter is the case, the road out of the low consumption will be long and demanding. For a sustained improvement in consumer sentiment, it is necessary – in addition to the current real income growth – for consumers to regain the planning security that is essential, in particular for major household purchases.”

Income expectations climb to the highest level since October 2021

After a small setback in the previous month, Germans are once again much more optimistic about their income expectations for the next 12 months: The indicator gained a whole 11.5 points, climbing to 19.7 points. This is the highest value since October 2021, when 23.3 points were measured. Compared to the same period last year, the increase is almost 25 points.

The slight fall in the inflation rate in Germany in June to 2.2 percent (after 2.4 percent in May) in conjunction with noticeable wage and salary increases as well as significant pension increases ensure that income optimism is on the rise again. Most of German households are currently experiencing real income growth.

Moderate increase in willingness to buy

Together with the significantly improved income expectations, the willingness to buy also increased in July. The indicator gained 4.6 points and currently stands at -8.4 points. The last time a better value was measured was more than two years ago, in March 2022, at -2.1 points. It can also be assumed that the euphoria surrounding the European Football Championship had a positive effect on the Germans’ willingness to buy.

Despite the increase, the willingness to buy is still below the level of the two lockdowns during the pandemic in spring 2020 and late 2020/early 2021.

Economic recovery only making slow progress

According to German citizens, the German economy will struggle to recover in the coming 12 months. Although the economic expectations indicator has risen by 7.3 points, it can only make up for the losses from the previous month: The indicator currently stand at 9.8 points. This corresponds exactly to the value from May 2024.

According to experts, the economic recovery will accelerate in the coming year. For 2004 only weak growth in gross domestic product (GDP) is expected.