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Finance

Posted By Global Banking and Finance Review

Posted on January 29, 2025

New year, same gloom for German consumer sentiment, GfK survey shows

By Miranda Murray

BERLIN (Reuters) - German consumer sentiment is set to dip heading into February due to growing pessimism among households about the economy and their income prospects, with no sustainable recovery in sight, a survey showed on Wednesday.

The consumer sentiment index, published by GfK and the Nuremberg Institute for Market Decisions (NIM), unexpectedly fell to -22.4 points from a slightly revised -21.4 points the month before.

Analysts polled by Reuters had expected a reading of -20.0.

"The consumer climate has suffered another setback and starts gloomy into the new year," NIM analyst Rolf Buerkl said.

"A sustainable recovery in the consumer climate is currently not in sight, especially as the inflation rate has also risen again recently."

Europe's largest economy contracted for a second year in a row in 2024, cementing Germany's place as a laggard among its large euro zone peers, and it also shrank in the final quarter of last year, suggesting little sign of an imminent reprieve.

Higher inflation towards the end of 2024 also had a dampening effect on consumer spending and income prospects, which was also weighed down by households' job concerns amid news of factory closures and production relocation at big-name companies.

Bayer, Volkswagen and Thyssenkrupp have announced job cuts in recent months.

FEB 2025 JAN 2025 FEB 2024

Consumer climate -22.4 -21.4 -29.6

Consumer climate components JAN 2025 DEC 2024 JAN 2024

- willingness to buy -8.4 -5.4 -14.8

- income expectations -1.1 1.4 -20.0

- business cycle expectations -1.6 0.3 -6.6

NOTE - The survey period was from Jan. 2-13, 2025.

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.

(Reporting by Miranda Murray; Editing by Rachel More and Alison Williams)

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