German consumer sentiment is set to improve with the start of the new year, though whether the rise marks the beginning of a sustained recovery from a very low level for Europe's biggest economy remains to be seen.
The consumer sentiment index rose to -25.1 points heading into January from a revised -27.6 the month before and above expectations of analysts polled by Reuters for a -27.0 reading.
A jump in income expectations in particular helped push up overall sentiment, while both the willingness to buy and positive economic expectations also increased, according to the survey of around 2,000 consumers published by the GfK institute and the Nuremberg Institute for Market Decisions (NIM).
"It remains to be seen whether the current rise is the beginning of a sustained recovery in consumer sentiment," said Rolf Buerkl, consumer expert at the NIM.
Consumers are still very worried, he added.
"Geopolitical crises and wars, sharply rising food prices and discussions about the national budget for 2024 continue to cause uncertainty," said Buerkl.
Willingness To Buy
In December 2023, the willingness to buy displayed a less negative value of -8.8, improving from -15.0 in November 2023 and -16.3 in December 2022. Income expectations showed a similar pattern, with a value of -6.9 in December 2023, reflecting an improvement from -16.7 in November 2023 and -43.4 in December 2022.
Business cycle expectations also saw a slight improvement, recording a value of -0.4 in December 2023, compared to -2.3 in November 2023 and -10.3 in December 2022.
These figures are based on a survey conducted between November 30 and December 11, 2023
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?"
Elsewhere, the income expectations sub-index reflects expectations about the development of household finances in the coming 12 months, and the additional business cycle expectations index reflects respondents' assessment of the general economic situation over the next 12 months.
Additional reporting by ESM