Market Analysis

German consumer sentiment is poised for a significant recovery heading into August, as household income expectations reach their highest level in over two years due to slightly lower inflation and noticeable wage increases, according to a survey released on Wednesday.

The consumer sentiment index, published jointly by GfK and the Nuremberg Institute for Market Decisions (NIM), rose more than anticipated, climbing to -18.4 points for August, up from a revised -21.6 in July, and surpassing the forecasted -21.0.

This improvement is largely driven by consumers' income expectations for the next 12 months, which have hit their highest mark since October 2021. Additionally, there were moderate increases in economic expectations and willingness to buy.

Rolf Buerkl, a consumer analyst at the NIM institute, noted that income expectations were a key factor in this rise. He added that "the euphoria triggered by the European Championship in many parts of the population also likely played a role." However, Buerkl warned that "it remains to be seen whether this effect is sustainable or just a short-lived flare-up."

He cautioned that "as quickly as this elation has arisen, it can also disappear again. If that happens, the path out of the consumption slump will be long and arduous."

An indicator reading above zero signals year-on-year growth in private consumption, while a value below zero indicates a decline compared to 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.

Paraphrasing text from "Reuters" all rights reserved by the original author.