Improvement in consumer sentiment persists, yet levels of uncertainty remain elevated. - Improvement in consumer sentiment persists, yet anxiety levels remain elevated
Article:
Consumer sentiment in Germany shows a moderate increase in June 2025, as the consumer climate index rises by 0.9 points, reaching -19.9, according to a survey conducted by GfK and NIM. This improvement marks the third consecutive monthly rise and the highest level since November 2024. However, the overall consumer sentiment remains deeply negative and cautious.
The enhanced optimism stems from more positive economic and income expectations amidst a backdrop of persistent uncertainty. This uncertainty originates primarily from unpredictable U.S. trade policies, stock market volatility, and the enduring weakness of the German economy.
The income expectations of those surveyed rose by 6.1 points to 10.4, reaching their highest level since October 2024, and the economic expectations index increased by 5.9 points to 13.1. Conversely, the propensity to make purchases slightly decreased, with consumers showing a preference for saving instead of spending.
The survey involved interviewing approximately 2,000 people from 3 to 14 April. The consumer climate index represents all private consumer expenditure, including retail, services, travel, rent, and health services.
Although the consumer climate index has shown improvement, uncertainty remains high due to factors like unpredictable U.S. customs and trade policies, stock market volatility, and lingering concerns about economic stagnation for a third consecutive year. These factors have led consumers to maintain a cautious attitude and prioritize savings. The savings indicator climbed by 1.6 points in May to 10.0, indicating that many consumers prefer to save rather than spend amid uncertain prospects.
Inflation in Germany remained moderate and stable at +2.1% year-on-year in April 2025, suggesting that price pressures are not the primary driver behind consumer hesitation but contribute to overall economic considerations.
The increase in the consumer climate index is moderate and comes from a low base, with sentiment described as extremely low overall. Consumers remain wary given the economic outlook and external geopolitical factors, leading to a fragile recovery in consumer sentiment and muted purchasing behavior despite positive signs in income outlooks. The declining willingness to buy, combined with the rising savings indicator, reflects a preference for financial prudence in uncertain times, which dampens immediate consumption and slows down a more robust recovery in retail and consumer markets.
- EC countries may observe a shift in employment policy within their territories, considering the cautious yet optimistic consumer sentiment in Germany, where uncertainty in U.S. trade policies, stock market volatility, and economic stagnation have led to a preference for savings over spending, indicating financial prudence.
- In light of the fragile recovery in consumer sentiment and muted purchasing behavior in Germany, the governments of EC countries might need to reassess their employment policies, addressing the lingering concerns about economic stability and offering financial incentives that encourage spending and stimulate business growth.
