German consumer climate reaches 18-month high as income optimism rises

German consumer confidence continued its gradual recovery in October, reaching its highest level since April 2022, according to the latest GfK Consumer Climate report published by GfK and the Nuremberg Institute for Market Decisions (NIM). 

The Consumer Climate index for November is projected to rise by 2.7 points, bringing it to -18.3 points from a revised -21.0 points in October. 

The increase was driven largely by improved income expectations and a rising willingness to buy, marks the second consecutive month of growth in consumer sentiment.

The forward-looking indicator sampling over 2,000 German households captured shifts in consumer sentiment across income expectations, economic outlook, and readiness to make purchases.

Rolf Bürkl, a consumer expert at NIM, noted: "Following the slight improvement in the previous month, the Consumer Climate continues to improve. It has climbed to its highest level since April 2022, when -15.7 points were measured after the start of the war in Ukraine." 

Nonetheless, Bürkl cautioned that ongoing economic uncertainties and inflationary pressures still weigh heavily on consumer optimism. 

"The uncertainty caused by crises, wars, and rising prices is still very much present and is preventing factors that encourage consumption, such as real income growth, from taking full effect," he added.

Income expectations emerged as a bright spot, buoying consumer sentiment with a 3.6-point increase, pushing the indicator to 13.7 points. This optimism represents a striking improvement of 29 points over the same period last year. 

Falling inflation, coupled with notable wage growth across multiple sectors, has contributed to a sense of real income growth among consumers. Pensioners, too, are seeing real