Improved Consumer Morale Persists - Elevated Uncertainty Prevails - Improved consumer sentiment persists, yet uncertainty stays elevated
Improved Consumer Sentiment Amid Persisting Uncertainty
Consumer sentiment in Germany has experienced a gradual yet cautious uptick, as revealed by the GfK and NIM consumer climate index, which rose to -19.9 in June from -20.8 in May, marking the third consecutive monthly improvement.
According to NIM consumer expert, Rolf Bürkl, "the level of consumer sentiment remains very low, and consumer uncertainty remains high," primarily due to the unpredictable trade policies of the USA, turbulence on the stock markets, and the continued sluggishness of the German economy.
However, the income expectations of those surveyed for the consumer climate survey rose significantly, with a 6.1-point increase to 10.4 points – the highest value since October 2024. Likewise, the economic expectations index ascended by 5.9 points to 13.1 points, marking the fourth consecutive increase and the highest value in over two years.
Despite these positive signs, the propensity to make purchases decreased, dropping 1.5 points to -6.4 points. Bürkl explains, "People seem to be currently considering it advisable to save in view of the general economic situation." The propensity to save increased accordingly, reaching 10.0 points.
The consumer climate refers to total private consumption expenditure, encompassing not only retail but also services, travel, rent, and healthcare services. GfK and NIM conducted the monthly interviews with around 2,000 consumers from April 3 to 14.
The improved income and economic expectations have contributed to the incremental improvement in consumer sentiment; however, caution in spending persists, as indicated by the decrease in the buying propensity index. External pressures such as U.S. trade policies, volatile stock markets, and the risk of another year of economic stagnation in Germany continue to dampen broader optimism. Moreover, Germany's export-oriented economy makes it particularly sensitive to global trade tensions, exacerbating domestic economic uncertainty.
Should these positive trends persist, a gradual economic recovery is possible, but the subdued overall climate, weak underlying economic indicators, and high uncertainty could lead to prolonged stagnation. The German government may prioritize further investment and economic stimulus to bolster growth and consumer confidence, while higher savings tendencies could suppress domestic demand and slow recovery.
Germany's export dependence means that global trade tensions and economic slowdowns in key markets will continue to weigh on domestic sentiment and economic performance. Potential factors affecting future trends include geopolitical stability, stock market volatility, government policy response, and the global economic environment. Resolution or escalation of trade disputes, particularly with the U.S., stock market instability, proactive fiscal and monetary policies, and broader global consumer confidence trends will all remain relevant to Germany’s outlook.
- As the propensity to save increases in EC countries like Germany, various businesses may need to reassess their employment policies to account for reduced consumer spending.
- To counteract the potential slowdown in domestic demand due to high savings rates, the German government may consider implementing employment policies that stimulate economic growth and bolster consumer confidence, especially in the retail and service sectors.
