Saving behavior outweighs rising income expectations in July forecast
German consumer confidence declined slightly in July for the first time in four months, according to a joint report published Thursday by GfK and the Nuremberg Institute for Market Decisions. The consumer climate index dipped to minus 20.3, down 0.3 points from June and missing economists’ forecast of minus 19.0, according to a Wall Street Journal survey.
“After three consecutive increases, the consumer climate has thus suffered a slight setback,” said Rolf Buerkl, a consumer expert at the NIM.
Higher savings dampen sentiment
The decline was driven primarily by a marked increase in the public’s propensity to save. Despite improved expectations for income, German households appear increasingly focused on building financial buffers rather than spending.
“A high willingness to save among consumers is also an expression of their continuing uncertainty and thus a lack of planning security,” Buerkl added.
Income expectations, however, showed signs of strength, bolstered by recent wage negotiations, enhanced retirement benefits, and easing inflation pressures. These factors have increased the disposable income outlook for many households.
External pressures and geopolitical uncertainty linger
The report also highlighted the dampening effect of international developments. In particular, concerns about ongoing U.S. trade policy under President Donald Trump have contributed to German consumers’ hesitancy to commit to major purchases.
Economic outlook improves
Despite the dip in overall sentiment, consumer expectations for the German economy improved, reaching their highest level since the onset of Russia’s invasion of Ukraine. This surge in optimism is linked to forthcoming government stimulus measures aimed at defense and infrastructure, which are expected to boost economic activity later in the year.
