Consumer sentiment in Germany continued its positive trend from previous months in May and continued to improve. This was seen in the current consumption barometer from the German Trade Association (HDE). Accordingly, the index is rising for the fourth time in a row and is now at its highest level since the end of 2021. The falling inflation rate also has a positive impact. The increasing optimism of consumers could lead to a recovery in private consumption in the next few months.
Compared to the previous month, consumers' propensity to buy continues to increase, which can boost private consumption in the coming weeks. However, at the same time, consumers are planning to increase their savings efforts. Disposable income therefore flows not only into consumption, but also into financial security.
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Both companies and the federal government are somewhat more optimistic about further overall economic development in Germany in their current economic forecast. Consumers share this assessment. Their economic expectations are also rising compared to the previous month. They also expect that their personal income situation will improve with an economic upswing. Consumer income expectations are rising to their highest level since the start of the Russian war in Ukraine.
Overall, economic optimism in Germany continued to increase in May. Politics, business and consumers dare to look positively at developments in the next few months. However, some scepticism remains among consumers, who lack planning security due to crises and the lack of economic policy growth stimulus to date. Therefore, they continue to rely on financial provision through savings, which means that the consumer mood only increases slowly. If consumer sentiment continues to develop in this direction, it will be able to boost private consumption somewhat. However, it remains to be seen what macroeconomic growth stimulus this will provide.
More information:
HDE
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