In March, German consumer sentiment showed cautious optimism following the federal election, with minor improvements in economic outlook, income expectations, and willingness to make purchases. However, this budding confidence was counterbalanced by a sharp rise in the willingness to save, which rose 4.4 points to 13.8its highest level in nearly a year. As a result, the overall consumer climate index remained broadly stable, edging up just 0.1 points to minus 24.5.

The data suggest that while the political shift may have slightly eased public pessimism, households remain wary. The modest 2.3-point rise in income expectations to minus 3.1, alongside a 2.9-point gain in willingness to buy, signals a tentative rebound. Yet, both indicators remain at subdued levels, with willingness to buy still weaker than during pandemic lockdowns.

Economic expectations provided the brightest note, climbing 5.7 points to 6.9, the highest since April 2024. Nonetheless, the persistence of uncertainty means consumers are holding back, choosing to save rather than spend. The formation of a stable government and swift implementation of the new financial package will be critical to strengthening trust and stimulating consumption in the months ahead. The latest update leaves the German RPI at minus 11 and the RPI-P at minus 6. This means that economic activities are slightly behind market expectations in the German economy.

Another improvement is expected in a German sentiment indicator, up to minus 22.0 in April from minus 24.7 in March.

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.