Updated: Feb 26, 2025, 11: 03 GMT+00: 00
Key Points:
- German consumer confidence drops to -24.7, signaling weak private spending and raising expectations for ECB rate cuts.
- Income expectations fall 4.3 points to -5.4, the lowest since January 2024, driven by inflation, economic uncertainty, and politics.
- Willingness to buy declines 2.7 points to -11.1, reflecting weaker income expectations and concerns over the economic outlook.
German Consumer Confidence Falls Again – Can It Recover?
Consumer sentiment showed no signs of improvement for March 2025, pointing to weaker private consumption impacting the German economy.
The GfK Consumer Confidence Index unexpectedly fell from -22.6 for February to –24.7 for March, lower than a consensus of -21.4. The February survey provided no indications of a sharp economic turnaround:
- Income expectations dropped 4.3 points to -5.4, the lowest level since January 2024. Respondents attributed the drop to higher prices, economic uncertainty, and domestic politics.
- The willingness to buy index declined by 2.7 points to -11.1, weighed by lower income expectations.
The downward trends in income expectations and willingness to buy could impact private consumption, putting further pressure on the German economy.
Meanwhile, the willingness to save index increased marginally, from 8.2 points to 9.4 points, affirming a bleak consumer spending outlook.
Consumer Confidence, Inflation, and the Economic Outlook
The gloomy sentiment toward income expectations points to another potential economic contraction in 2025. A pullback in consumer spending would also ease demand-driven inflationary pressures, enabling the ECB to cut rates more aggressively to stimulate growth.
While consumers may view the outcome of Germany’s weekend elections positively, the true impact will hinge on policy details. Fiscal stimulus measures and efforts to curb rising unemployment will be crucial for improving economic conditions in 2025.
NIM Consumer Expert Rolf Burkl commented on the February survey:
“The current figures show no signs of a recovery in consumer sentiment in Germany. The Consumer Climate has been stagnating at a low level since the middle of last year. There is still a great deal of uncertainty among consumers and a lack of planning security.”
On the potential impact of Germany’s election, Burkl added:
“A fast formation of a new federal government after the parliamentary elections and the rapid approval of this year’s budget would give both companies and private households more certainty when it comes to planning. This would create important conditions for consumers to be more willing to spend money and to revive cons