The March survey confirmed a modest improvement in consumer confidence at quarter-end and expects a further gain next month. From a marginally weaker revised minus 30.6 in March, the climate indicator is forecast to climb to minus 29.5 in April, just 0.4 points stronger than the market consensus. While still low, the trend in the headline index is at least moving in the right direction.

Following four successive increases, economic expectations (3.7 after 6.0) suffered a modest loss this month. However, they remain just above their long-run average (zero) and a lot further above their level a year ago (minus 8.9). At the same time, income expectations (minus 24.3 after minus 27.3) improved further and have now risen more than 46 points since March 2022. However, the improvement here had little impact on buying intentions (minus 17.0 after minus 17.3) which were little changed and almost 15 points lower than a year ago.

In line with recent surveys, today's results suggest that household confidence is gradually returning. Even so, current levels still make any significant near-term bounce in consumer demand unlikely. Employment conditions are helping but real incomes continue to be eroded by high inflation. Indeed, GfK expect private consumption to subtract from real GDP growth in 2023. Still, today's update leaves both the German ECDI (22) and ECDI-P (31) far enough above zero to indicate that overall economic activity is currently running somewhat faster than generally expected.

Consumer climate, which has been gradually improving, is expected to rise to minus 29.9 in April's report versus minus 30.5 in March'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.