The January survey confirmed a modest improvement in consumer confidence at the start of the year and expects a further gain next month. From a marginally stronger revised minus 37.6 in January, the climate indicator is forecast to climb to minus 33.9 in February, slightly weaker than the market consensus. While still low, the trend in the headline index is at least moving in the right direction.

Economic expectations (minus 0.6 after minus 10.3) posted a marked increase, achieving its highest reading since February 2022 and is now almost back to its long-run average. Income expectations (minus 32.2 after minus 43.4) were similarly sharply firmer and up for a fourth straight month. However, they remain some 49.1 points short of their level a year ago. Moreover, buying intentions (minus 18.7 after minus 16.3) deteriorated and were nearly 31 points below their level in January 2022.

In line with the previous period's survey, today's results suggest that government measures to tame the impact of rising prices on households are having some effect. However, the consumer sector is still very cautious and spending intentions historically very weak. Accordingly, near-term prospects for retail sales remain soft. That said, with Germany's ECDI (3) and ECDI-P (minus 6) both close to zero, economic activity in general is performing much as expected.

Consumer climate, which improved by more than 2 points in January to minus 37.8, is expected to improve further to minus 33.0 for February's readings.

GfK's consumer climate survey asks around 2,000 German consumers every month about their assessment of economic conditions. The questions focus on economic and income expectations and consumers' willingness to buy. Having calculated the differences between the positive and negative responses for each question the results are synthesized into a single number that reflects overall consumer expectations for the coming month.

Any insight into household expenditure is vital to understanding how the economy as a whole is shaping up. The monthly correlation between the GfK consumer gauge and actual spending is not especially high but trends in the index can offer useful information about potential underlying developments in consumer behavior. As a forward looking indicator, the GfK index is one input used by analysts in the construction of their forecasts of future German retail sales.