The mood of German consumers is better than it has been for two years. The barometer for the consumer climate in May rose surprisingly significantly by 3.1 to minus 24.2 points, as reported by GfK and the Nuremberg Institute for Market Decisions (NIM). It was also the third increase in a row. The business climate surveyed by the Munich Ifo also recently showed such a three-month upward trend, which raises hopes of a gentle upswing.
However, the consumer mood is not yet exhilarating – on the contrary: NIM expert Rolf Bürkl points out that the barometer is still at an extremely low level. According to chief economist Alexander Krüger from Hauck Aufhäuser Lamp Privatbank, it remains to be hoped that the approaching spring will further improve the mood: “The consumer climate is encouraging for a revival in private consumption.” The stronger increase in consumer sentiment compared to the previous two months is primarily due to noticeably better income expectations, explained NIM expert Bürkl. Analyzes showed that these were primarily based on real income development.
This also corresponds to the assessment of the Ifo survey director Klaus Wohlrabe, according to which consumers are apparently becoming more willing to spend: “Increases in real wages play a role in this.” Inflation has recently fallen significantly, while significant wage increases have been agreed in many sectors. This supports purchasing power. This also ensures that the willingness to purchase relatively expensive consumer goods such as cars or furniture increases. After stagnation in the previous month, the barometer climbed 2.7 points to minus 12.6 points in April. To put things in perspective, Bürkl points out that the propensity to buy is still significantly below the values measured in the two corona-related lockdowns in 2020 and 2021. In addition to rising prices, a pronounced level of uncertainty is causing private households to save their financial resources and invest less in consumption.
Even though consumers’ economic expectations have improved slightly for the third time in a row, a sustainable recovery is still missing from the consumer’s perspective, is the GfK’s conclusion. However, Federal Minister of Economics Robert Habeck sees the local economy at a turning point thanks to falling inflation, increasing purchasing power and higher production. In its spring projection, the federal government slightly increased the forecast for gross domestic product growth this year to 0.3 percent. By 2025 there should be growth of 1.0 percent.