| Actual | Previous | |
|---|---|---|
| Index | -22.4 | -21.3 |
Highlights
As economic and income expectations falter, Germany's consumer sentiment begins the new year in the negative zone. The consumer climate index, which had hinted at a cautious recovery, declines again, falling from minus 21.4 to minus 22.4 points for February 2025. This downturn reflects growing economic pessimism, weakened income expectations, and reduced spending willingness.
The economy's sluggish performance, shrinking by 0.2 percent in 2024 following a 0.3 percent decline in 2023, dampens confidence. Inflation, factory closures, and job uncertainty further weigh on households. Income expectations, which initially showed promise in late 2024, lose 2.5 points to settle at minus 1.1, echoing a broader trend of declining real incomes. With shrinking purchasing power, willingness to buy drops to minus 8.4 points, its lowest since August 2024.
However, the willingness to save climbs by 2.3 points to 8.2, signalling a shift towards financial caution rather than economic optimism. This growing reluctance to spend, coupled with inflationary pressures and weak growth forecasts, suggests that consumer sentiment will remain fragile. Unless economic stability and confidence are restored, a sustained recovery in the consumer climate remains elusive. The latest update leaves the RPI at 12 and the RPI-P at 6, meaning that economic activities are slightly ahead of expectations in the Geran economy.
The economy's sluggish performance, shrinking by 0.2 percent in 2024 following a 0.3 percent decline in 2023, dampens confidence. Inflation, factory closures, and job uncertainty further weigh on households. Income expectations, which initially showed promise in late 2024, lose 2.5 points to settle at minus 1.1, echoing a broader trend of declining real incomes. With shrinking purchasing power, willingness to buy drops to minus 8.4 points, its lowest since August 2024.
However, the willingness to save climbs by 2.3 points to 8.2, signalling a shift towards financial caution rather than economic optimism. This growing reluctance to spend, coupled with inflationary pressures and weak growth forecasts, suggests that consumer sentiment will remain fragile. Unless economic stability and confidence are restored, a sustained recovery in the consumer climate remains elusive. The latest update leaves the RPI at 12 and the RPI-P at 6, meaning that economic activities are slightly ahead of expectations in the Geran economy.
Definition
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.
Description
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.
