German consumer morale stabilizes in May after sharp decline

German consumer sentiment stabilized in May after a recent downward trend, though households remained broadly pessimistic amid geopolitical uncertainty and inflation pressure, survey data showed Friday.

The NIM Consumer Climate powered by GfK rose 3.3 points, with the indicator for June standing at minus 29.8 points, compared with a revised minus 33.1 points in the previous month.

“Consumer Climate has, at least for the moment, ended its downward trend and is recovering somewhat this month,” said Rolf Buerkl, head of consumer climate at NIM.

He said the improvement was supported by a significantly better income outlook, lower willingness to save and a slight rise in willingness to buy.

“However, the negative impact of the conflict in the Middle East remains largely unchanged and is still visible in the Consumer Climate,” he added.

Income expectations recovered sharply in May, rising 11.4 points to minus 13.0, after a steep decline at the start of the war in Iran.

NIM said some geopolitical uncertainty appeared to have been priced into consumer expectations as the Middle East conflict has not escalated further so far, while political signals also pointed to possible relief measures.

However, the income indicator remained clearly in pessimistic territory compared with pre-crisis levels.

Willingness to buy increased slightly by 1.2 points to minus 13.2, but the indicator remained subdued, suggesting consumers still do not view the current environment as favorable for major purchases.

Willingness to save fell for a third consecutive month, declining 2.2 points to 13.9, although it remained high by long-term standards.

Economic expectations also showed no further weakening, rising 2.5 points to minus 11.2.

NIM said most consumers still expect the economic situation to deteriorate over the next 12 months, but the modest recovery was a positive signal given repeated downward revisions to growth forecasts.

Inflation expectations eased slightly, with the relevant indicator falling 5.4 points to minus 0.4, likely reflecting lower energy taxes on diesel and gasoline.

At the same time, Germany’s annual inflation rate rose to 2.9% in April, one percentage point higher than in February.