At minus 18.3, up from a marginally firmer revised minus 21.0 in October, GfK expects its consumer climate index to hits its highest level in November since April 2022. The outcome was stronger than the market consensus. Increased consumer willingness to buy and improved income expectations are key factors in addition to a decrease in willingness to save and an increase in optimistic income expectations.

Nevertheless, consumers remain pessimistic about the outlook with their economic expectations worsening for the third consecutive month to 0.2 points. The government's GDP forecast for the year indicates a 0.2 percent contraction, which has exacerbated economic concerns.

Sentiment remains fragile, despite the slight increase in consumer confidence making a sustained and meaningful recovery in the consumer spending unlikely for now. Even so, today's update leaves the German RPI and RPI-P at 29 and 45 respectively, showing that recent overall economic activity is running well ahead of forecasts.

Forecasters look for only modest improvement to minus 20.5 in the index as consumers remain gloomy.

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.