German Consumer Sentiment Set To Continue Recovery: GfK

(RTTNews) - German consumer confidence is set to continue its recovery in May as trade tariff hikes by the US administration had a limited impact, a closely watched survey showed Tuesday.

The forward-looking consumer sentiment index improved unexpectedly to -20.6 in May from revised -24.3 in the previous month, a survey jointly published by the market research group GfK and the Nuremberg Institute for Market Decisions showed. The score was expected to fall to -25.6.

"Any negative effects from tariff hikes are likely to be mitigated by the successful conclusion of coalition negotiations and the imminent formation of a fully functioning government," Rolf Bürkl, consumer expert at NIM said.

Among components of consumer confidence, income expectations and propensity to buy logged noticeable increases in April, while economic expectations improved only slightly.

Income expectations climbed for the second straight month in April. The index gained 7.4 points to 4.3, which was the highest since October 2024.

The improvement was driven by the collective bargaining agreement in the public sector. The expected increase in pay is likely to be above the current inflation of just over 2 percent, which will benefit purchasing power, the market research group said.

The propensity to buy gained strength from the improvement in income prospects. The propensity to buy rose 3.3 points to -4.9 in April.

GfK said the upward trend in the propensity to buy can continue depending on whether inflation remains at around 2 percent, close to the European Central Bank's target. However, GfK said renewed uncertainty due to an escalating trade conflicts would undo any further recovery in consumer sentiment.

Economic expectations improved for the third successive month in April. The corresponding index rose 0.3 points to 7.2. A better reading was last recorded in July 2024.

The significant decline of 5.4 points in the propensity to save also supported the consumer confidence.

Whether the fall in the propensity to save will continue in coming months will depends on how the trade conflicts between the US and the rest of the world develops. The survey was conducted monthly on behalf of the EU commission. Consumer interviews were carried out among 2,000 consumers between April 3 and 14.