The recovery in consumer sentiment in Germany comes to a standstill for the time being in June. Both income and economic expectations suffered moderate losses. The willingness to buy fell slightly compared to the previous month and thus continues to stagnate at a very low level. The willingness to save, on the other hand, has increased slightly, consolidating its already high level. Taking these developments into account, the consumer climate is declining slightly overall: in the forecast for July, the indicator falls by 0.8 points to -21.8 points – compared to the previous month (revised to -21.0 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.

After four increases in a row, the consumer climate has now suffered a small setback. In addition to the slight decline in income expectations, this is mainly due to the willingness to save, which rose by 3.2 points to 8.2 points in June.

“The interruption of the recent upward trend in consumer sentiment shows that the road out of the sluggish consumption will be difficult and there can always be setbacks,” explains Rolf Buerkl, consumer expert at NIM. “The slightly higher inflation rate in Germany in May is clearly causing more uncertainty among consumers again, which is also reflected in the increase in the willingness to save. For a sustained recovery in consumer sentiment, consumers need – in addition to the existing real income growth – planning security, which is particularly necessary for larger household purchases. And this security will only return if the upward pressure on prices is further dampened and if consumers are shown clear future prospects. This also means that the government must quickly and clearly communicate the burdens and reliefs people will face as a result of the upcoming budget discussions. Then the noticeable real income increases can be prevailed and consumers are willing to spend more,” says Rolf Buerkl.

The upward trend in income expectations has come to a halt

The clear upward trend in income expectations comes to a standstill in June – at least for the time being. After four consecutive increases, the indicator lost 4.3 points and fell to 8.2 points. Nevertheless, the increase compared to the same period last year is almost 19 points.

The main reason for the moderate decline in income expectations is likely to be the rise in the inflation rate. According to the Federal Statistical Office, the inflation rate in Germany was 2.4 percent in May of this year, after 2.2 percent in March and April. It has therefore moved slightly away from the European Central Bank’s (ECB) target of around 2 percent. The influence of inflation on income expectations is confirmed by an in-depth analysis of income expectations – carried out by the NIM this June. In an open survey, 62 percent of respondents mentioned rising prices as the main reason for their income pessimism.

The willingness to buy remains at a low level

Consumers’ willingness to buy continues to show little movement. The indicator has remained at an extremely low level for more than two years now. This month, it lost 0.7 points and now stands at -13 points. Compared to the same period last year, a small increase of 1.6 points was measured.

The current reluctance to buy is largely due to rising prices. If private households have to spend more on food and energy, there is a lack in the financial resources for larger purchases. In addition, the missing planning security means that people are more likely to build up reserves for emergencies or similar, which are therefore also not available for consumption.

Hopes of a rapid economic recovery are dampened

The hopes of Germans for a rapid economic recovery in the course of this year were dampened in June. After four consecutive increases, the economic indicator lost 7.3 points and fell to 2.5 points.

Despite the decline in June, it can be assumed that the economic recovery in Germany is likely to continue in the second half of the year. However, consumers expect it to be rather weak. Some economic experts do not expect to see a slight acceleration until next year.