Germany's consumer climate has slipped further into negative territory, marking its third consecutive decline and signalling a deepening summer slump. The headline index fell to minus 23.6 points for September, a 1.9-point drop, driven mainly by collapsing income expectations, which plunged 11.1 points to just 4.1, their lowest since March. Rising fears of unemployment, with jobless figures edging closer to the three-million mark, have shaken household confidence. At the same time, inflation anxieties, stoked by volatile energy markets and US tariff policies, are reinforcing this uncertainty.

Although consumers' propensity to save fell slightly, it offered little cushion to sentiment. Willingness to buy remains stuck at historically low levels (minus 10.1), with households postponing major purchases due to diminished financial security. Economic expectations have also slumped for a second consecutive month, dropping to minus 7.4 points, as concerns over political instability at home and abroad weigh heavily.

The latest updates show that consumers are tightening their belts, bracing for higher prices and weaker job prospects. Without a marked improvement in employment trends or inflation stability, hopes of a recovery in household demand before year-end appear increasingly remote, plunging the RPI to minus 36 and the RPI-P to minus 46. This means that economic activities continue to lag behind the expectations for the German economy.

German consumers remain gloomy with change in the index expected flat at minus 21.5 in September from August’s minus 21.5.

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.