BERLIN (Reuters) - German consumer sentiment is set to recover significantly heading into August as households' income expectations hit their highest point in over two years due to slightly lower inflation and noticeable wage increases, a survey showed on Wednesday.
The consumer sentiment index, published jointly by GfK and the Nuremberg Institute for Market Decisions (NIM), rose more than expected, to -18.4 points heading into August, from a slightly revised -21.6 in July and above a forecast -21.0.
The rise is due primarily to consumers' income expectations for the next 12 months reaching their highest point since October 2021, while economic expectations and the willingness to buy also recorded moderate increases.
While income expectations aided the rise, "it is highly likely that the euphoria triggered by the European Championship in many parts of the population also played a role," said Rolf Buerkl, consumer analyst at the NIM institute.
However, he cautioned that "it remains to be seen whether this effect is sustainable or just a short-lived flare-up."
"As quickly as this elation has arisen, it can also disappear again. If the latter is the case, the road out of the consumption slump will be long and arduous," added Buerkl.
AUG 2024 JUL 2024 AUG 2023
Consumer climate -18.4 -21.6 -24.6
Consumer climate components JUL 2024 JUN 2024 JUL 2023
- willingness to buy -8.4 -13.0 -14.3
- income expectations 19.7 8.2 -5.1
- business cycle expectations 9.8 2.5 3.7
NOTE - The survey period was from July 4-16, 2024.
The consumer climate indicator forecasts the progress of real private consumption in the following month.
An indicator reading above zero signals year-on-year growth in private consumption. A value below zero indicates a drop compared with the same period a year earlier.
According to GfK, a one-point change in the indicator corresponds to a year-on-year change of 0.1% in private consumption.
The "willingness to buy" indicator represents the balance between positive and negative responses to the question: "Do you think now is a good time to buy major items?"
The income expectations sub-index reflects expectations about the development of household finances in the coming 12 months.
The additional business cycle expectations index reflects respondents' assessment of the general economic situation over the next 12 months.