German consumer sentiment is set to extend its recovery heading into the new year as government relief measures meant to take the bite out of soaring energy prices seem to be having an effect, according to a GfK institute survey.
The institute said its consumer sentiment index rose to -37.8 heading into January from a slightly revised reading of -40.1 in December, and above forecasts from analysts polled by Reuters of -38.0.
"With the third rise in a row, the consumer climate is slowly working its way out of the trough. The light at the end of the tunnel is getting a little brighter," said GfK consumer expert Rolf Buerkl.
However, despite the slight improvement, consumer confidence is still at a low point. October had marked the lowest reading in over a decade at -42.8.
A negative reading suggests a year-on-year drop in private consumption.
Recovery Still On Shaky Ground
Buerkl said the recovery was still on shaky ground and could be thrown off balance, for example, by a significant jump in energy prices should the geopolitical situation deteriorate.
"The light at the end of the tunnel would become darker again very quickly, or even go out altogether," he said.
All three sub-indices saw an increase in December, with the largest jump seen in income expectations, rising to -43.4 from -54.3 the previous month, as energy prices have developed more moderately in recent weeks and a one-off gas relief payment for households in December kicks in.
The consumer climate indicator forecasts the development 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 the assessment of those questioned of the general economic situation in the next 12 months.