German Consumer Sentiment Improves in February Following Minimum Wage Increase

Impact of Minimum Wage on Consumer Sentiment

BERLIN, Jan 28 (Reuters) - The mood among German consumers is set to improve in February, lifted by a sharp rise in income expectations following an increase in the minimum wage since the start of the year as well as reduced inflation fears, a survey showed on Wednesday.   

Consumer Climate Index

The index measuring consumer sentiment, published by the GfK market research institute and Nuremberg Institute for Market Decisions (NIM), rose to -24.1 points in February from -26.9 points the month before, beating the expectations of analysts polled by Reuters for only a slight rise to -26.0 points.

Economic and Income Expectations

While households' propensity to buy rose moderately, partly on signs of easing inflation, the survey also showed that income expectations were the major driver in the brighter headline figure, even though it still remains at a low level.

Potential Risks to Consumer Sentiment

The hourly minimum wage in Germany, Europe's largest economy, initially rose to 13.90 euros ($16.52) at the start of 2026 and will grow again, to 14.60 euros, next year, giving a boost to income expectations. 

"However, it remains to be seen whether this positive trend can be sustained in the coming months," said Rolf Buerkl, head of consumer climate at NIM.  

"The ongoing geopolitical tensions and an escalation of trade conflicts could quickly cause sentiment to turn negative again," said Buerkl. "The current improvement is certainly on shaky ground."

The German government is expected to lower its growth forecast for gross domestic product (GDP) in 2026 to 1.0% from 1.3%, a person familiar with the projections told Reuters last week, reflecting greater economic uncertainty in global trade.

The downward revision is likely to be included in the economy ministry's annual economic report to be presented on Wednesday, the person said.

FEB JAN FEB

2026 2026 2025

Consumer climate -24.1 -26.9 -22.6

Consumer climate components

JAN DEC JAN

2026 2025 2025

- economic expectations 6.6 1.2 -1.6

- income expectations 5.1 -6.9 -1.1

- willingness to buy -4.0 -7.5 -8.4

- willingness to save 17.9 18.7 8.2

 The survey period was from January 2-13, 2026.

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 economic expectations index reflects respondents' assessment of the general economic situation over the next 12 months.

($1 = 0.8413 euros)

(Reporting by Miranda MurrayEditing by Ludwig Burger)