Germany consumer confidence expected to improve to six-month high in February

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Confidence among German consumers is set to improve in February for a fourth straight month, helped by better expectations for the economy and personal finances amid lower energy prices and easing concerns of a recession.

Germany’s forward-looking consumer-sentiment index forecasts confidence to increase to minus 33.9 in February from minus 37.6 in January, its highest level since August, data from market-research group GfK showed Tuesday.

Economists polled by The Wall Street Journal expected confidence to increase to minus 33.0.

“With the fourth increase in a row, the positive trend in consumer sentiment is consolidating,” GfK’s consumer expert Rolf Buerkl said. “Even though the level is still very low, pessimism has eased recently,” he said.

Recent improvements in confidence were driven by moderating energy prices, in part due to cost-cutting measures by the German federal government. “Falling energy prices, such as for gasoline and heating oil, have ensured that consumer sentiment is less gloomy,” Mr. Buerkl said.

GfK uses data from three subindexes from the current month to derive a sentiment figure for the coming month. In January, two of the three main components–economic and income expectations–improved, while propensity to buy deteriorated.

Economic expectations rose to minus 0.6 in January from minus 10.3 in December, its third consecutive monthly increase, climbing to levels not seen since before the Ukraine war and getting closer to its long-term average of zero.

“Consumers are apparently increasingly gaining the impression that the recession which many experts expected for the German economy this year will be less severe than feared just a few weeks ago, and may even be avoided altogether,” the report said.

The index gauging income expectations also rose, to minus 32.2 from minus 43.4, likely helped by the government’s relief package to lower energy bills. The indicator suggests consumers are assuming that income losses won’t be as severe as feared, but still points to very low sentiment when assessing income prospects.

The measure gauging German consumers’ propensity to buy declined in January to minus 18.7 from minus 16.3, highlighting still elevated uncertainty over energy prices. “A significant portion of this uncertainty apparently stems from the fact that many households expect significantly higher heating bills in the months ahead, which they are already putting money aside for,” GfK said.

Despite recent gains in confidence, overall sentiment remains subdued and conditions in 2023 so far don’t bode well for a consumer-driven boost to the German economy. “Private consumption will not be able to positively contribute to overall economic development this year,” Mr. Buerkl said.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com



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