The GfK Consumer Climate Indicator for Germany improved to -21.3 heading into January 2025, up from a revised -23.1 in December, which marked the lowest level since May. This latest figure surpassed market expectations of -22.5, driven by slight improvements in income expectations and purchasing willingness. However, despite the uptick, consumer sentiment remains subdued amid ongoing economic challenges.

Recovery in Income Expectations and Willingness to Buy

Income expectations showed notable improvement, climbing to 1.4 from -3.5 in the previous month. This shift reflects a modest easing in consumer concerns over disposable income. Additionally, the willingness to buy rose slightly to -5.4 from -6.0, signaling a tentative rebound in consumer spending intentions. However, these gains are set against a backdrop of high inflation and economic uncertainty, which continue to dampen confidence.

Stabilization in Economic Prospects

Economic prospects stabilized at 0.3 in January, recovering from -3.6 in December. While this stabilization mirrors figures from the same period last year, it reflects a persistently weak growth outlook for 2025. Rising energy and food prices, coupled with job security concerns, have kept optimism in check. The propensity to save also dropped sharply to 5.9 from 11.9, suggesting that consumers may be relying on savings to offset rising living costs.

Expert Outlook: Long Road to Recovery

Consumer expert Rolf Bürkl from NIM noted that, despite the recent improvement, “At -21.3 points, the consumer climate remains very low.” He added that a sustained recovery in sentiment is unlikely in the near term, given the high levels of economic uncertainty. Rising prices and fears over employment stability continue to weigh heavily on consumer confidence, leaving a full recovery further down the road.