In July 2025, German consumer sentiment remained stagnant, reflecting a tug-of-war between growing income optimism and heightened economic caution. While income expectations climbed for the fifth consecutive month, reaching a 12-month high of 15.2 points, this optimism has yet to translate into spending confidence. Instead, Germans are tightening their purse strings, pushing the consumer climate indicator down 1.2 points to -21.5 for August, about 2.5 points below the consensus.

The willingness to save jumped for the third consecutive month, reaching its highest level since February 2024 at 16.4 points, while the willingness to buy fell to minus 9.2 points, reflecting deep consumer hesitation. Despite rising real incomes driven by moderate inflation and wage growth, broader uncertainty, including global trade tensions and domestic price pressures, continues to dominate public sentiment. The sharp 10-point drop in economic expectations underscores this anxiety, suggesting that without greater policy clarity and stability, German households will remain reluctant to spend.

Thus, a meaningful recovery in consumer sentiment hinges on reducing uncertainty and restoring trust in the economic outlook. Until then, the German economy may struggle to unlock the full potential of its consumers' growing income expectations. These latest updates take the German RPI to 12 and the RPI-P to 14. This means that economic activities continue to exceed expectations in the German economy.

Sentiment expected better at minus 19.0 in August from minus 20.3 in July.

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.