Consumer sentiment in Germany showed cautious improvement in April 2025, although it remains at historically low levels. The consumer climate index rose modestly to minus 20.6 points for May, about 4.9 points above the consensus estimate and thus reflecting stronger income expectations and an increased willingness to buy, supported by a significant fall in savings propensity. Notably, income expectations improved by 7.4 points, partly driven by a public sector wage agreement that outpaces inflation, enhancing purchasing power.

However, while the willingness to buy continues its upward trend, it remains subdued. Economic expectations grew slightly, just 0.3 points, indicating fragile confidence amidst persistent recession risks and uncertainty linked to U.S. trade policies. The decline in consumers' willingness to save suggests reduced uncertainty, likely influenced by political stability following successful coalition negotiations.

Nevertheless, potential escalation in global trade conflicts could easily reverse these fragile gains, underlining the volatility of current consumer sentiment. This latest update takes the German RPI to 1 and the RPI-P to 12. This implies that economic activities in Germany are slightly ahead market expectations.

The consensus sees the index at minus 25.5 in May versus minus 24.5 in April 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.