German consumer sentiment hits two-year high

Consumer sentiment in Germany has risen to its highest level in more than two years, according to a closely watched survey from GfK and the Nuremberg Institute for Market Decisions (NIM), as income expectations and the economic outlook improved significantly.

The GfK Consumer Climate index for August increased to -18.4, up from a revised -21.6 in July and ahead of the -21.0 expected by economists. This was the highest reading since April 2022.

The income expectations indicator surged 11.5 points to 19.7 – its highest print since October 2021. GfK said this was helped by ongoing falls in inflation in Germany, which eased to 2.2% in June, along with noticeable wage and salary increases as well as significant pension increases.

There was also a moderate increase in consumers' willingness to buy, with the indicator increasing 4.6 points to -8.4 – its highest since March 2022 – though it still remains below pre-pandemic levels.

Meanwhile, consumers' willingness to save was virtually unchanged, easing to 8.0 from 8.2.

"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," said 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."