Consumer confidence in Germany is projected to further improve in June, driven by rising economic and income expectations amidst decelerating inflation and increasing wages, according to a survey released on Wednesday.
The consumer confidence index climbed to -20.9 in June, up from a revised -24.0 in May, as reported by a joint survey from GfK and the Nuremberg Institute for Market Decisions.
This marks the fourth consecutive month of improvement in the overall consumer climate.
Rolf Burkl, a consumer expert at the Nuremberg Institute for Market Decisions, noted that declining inflation rates coupled with significant wage and salary increases are bolstering consumer purchasing power. This increase in purchasing power not only raises income expectations but also mitigates consumer uncertainty, which had previously led to a higher propensity to save.
In May, there was a notable drop in the propensity to save, with the corresponding index plummeting by approximately 10 points to 5.0, the lowest level since August 2023.
Economic expectations among households rose for the fourth consecutive month in May, with the index increasing 9.1 points to 9.8. Simultaneously, the income expectations index edged up by 1.8 points to 12.5, reaching its highest level since January 2022. This positive trend was supported by rising wages and salaries in tandem with falling inflation, reinforcing real income growth and thereby strengthening households' purchasing power.
Despite this, the propensity to buy did not benefit significantly from the improving economic and income expectations. The corresponding index inched up only 0.3 points to -12.3 in May.
GfK attributed this to higher prices for food and energy, along with ongoing uncertainty, which compelled households to allocate financial resources for future needs rather than current spending.
"There remains some uncertainty among German consumers," said Burkl. "This can be linked to the lack of clear future prospects in the country, which undermines planning certainty for purchases. People will need to regain this certainty before they are willing to channel their growing purchasing power into larger expenditures."
