German consumer sentiment is ending 2025 on a notably weak footing, signalling a cautious start to 2026. The consumer climate index is forecast to fall sharply to minus 26.9 points, driven less by collapsing economic expectations and more by mounting household caution. Income expectations continue to deteriorate, reflecting rising inflation fears and pressure on real purchasing power, which remains the key determinant of consumer behaviour.

What stands out is the sharp rise in the willingness to save, now at its highest level since the global financial crisis. This shift suggests households are prioritising precautionary saving over consumption, a development that undermines both late-season Christmas spending and early-year demand. The willingness to buy has weakened again, reinforcing the picture of restrained consumer activity despite temporary improvements earlier in the year.

Economic expectations provide only limited reassurance. While they edged up slightly, indicating hopes of a modest recovery, this optimism appears fragile and insufficient to offset concerns about incomes, inflation, and long-term security, including pensions.

Overall, the latest data portray an economy where confidence in future growth exists, but households remain unwilling to translate that belief into spending, posing a clear downside risk to Germany's near-term demand outlook. These updates take the RPI to minus 4 and the RPI-P to minus 1, meaning that economic activities are now within the expectations of the German economy.

Consumer sentiment index expected pretty steady at minus 23.0 in January versus minus 23.2 in December.

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.