Germany consumer sentiment picks up - GfK

German consumer sentiment has continued to strengthen, a closely-watched survey showed on Thursday.

The latest GfK Consumer Climate Indicator rose to -24.2 heading into May, the highest reading in two years and above forecasts for -25.9.

It was also on improvement on April’s revised -27.3, and the third consecutive monthly rise.

Germany’s economy, Europe’s biggest, has been hit hard by record inflation, surging energy costs, higher interest rates and weaker global demand.

However, with inflation now falling back and wages rising, sentiment is starting to pick up.

Income expectations rose 12.2 points to 10.7 – the highest since January 2022 – while the measure for economic prospects edged into positive territory, rising to 0.7 from -3.1.

Rolf Burkl, consumer analyst at Nuremberg Institute for Market Decisions (NIM), which co-publishes the index, said: “Our analyses indicate that income expectations are primarily based on real income development. And the signals here are definitely positive.”

However, he also noted: “In times of multiple crises and a lack of confidence in future development, there is still a lot of uncertainty among consumers.”

Carsten Brzeski, global head of macro at ING, said: “The German economy has entered a phase of cyclical improvements.

"Somewhat surprisingly, the current improvement has been driven by a rebound in industrial activity, trade and weather-driven stronger activity in the construction sector. Private consumer, however, has stayed behind.

“2024 should be the year with the strongest increase in real wages in almost a decade. Some pick-up in private consumption after the consumption slump of the winter months will happen.”

The survey was carried out between 4 and 15 April.