Germany’s GfK Consumer Climate Indicator dropped to -24.7 heading into March 2025, down from a revised -22.6 in the previous period and falling short of market expectations of -21.4.
German consumer morale unexpectedly falls
This marked the second consecutive month of decline, and the lowest reading since last April, highlighting the ongoing economic challenges facing the new government. These challenges include persistent cost pressures, political uncertainty, and a rising number of corporate bankruptcies, which have weighed heavily on consumer sentiment.
Income expectations saw a significant downturn, falling to a 13-month low of -5.4 compared to -1.1 in February, reflecting growing concerns about personal financial security amid an uncertain economic environment. Similarly, the willingness to buy deteriorated further, dropping to -11.1 from -8.4 in the previous month, suggesting that consumers are becoming more cautious about making significant purchases. On the other hand, the propensity to save increased to 9.4 from 8.2, indicating that households are prioritizing saving over spending, likely due to concerns over job security, rising costs, and economic instability.
Economic expectations improved
Despite these setbacks, economic expectations showed some improvement, rising to 1.2 from -1.6 in the previous period. This shift signals that consumers may see potential for economic stabilization or growth in the medium term, but these optimistic expectations have yet to translate into a broader rebound in confidence.
Expert comment
"The current figures show no signs of a recovery in consumer sentiment," said Rolf Bürkl, consumer expert at NIM. He emphasized that while consumers remain cautious, the swift formation of a new government and the prompt adoption of the 2025 budget could play a pivotal role in restoring consumer confidence. Such measures could help alleviate some of the prevailing uncertainties and potentially stimulate consumption, but it will likely take time for consumer sentiment to fully recover. As Germany heads into 2025, monitoring political developments, fiscal policies, and broader economic indicators will be crucial to gauging the trajectory of consumer confidence in the coming months.
