Source: Sharecast
The forward-looking Consumer Climate Indicator rose 3.7 points to -20.6 for May, surprising economists who had pencilled in a deterioration to -26.
This was the highest reading since November and the second straight monthly improvement in the indicator.
Income expectations improved in April, with the income indicator jumping 7.4 to a seven-month high of +4.3, which GfK said could have been a result of the collective bargaining agreement reached for the public sector wage hikes in early April.
Consumers' willingness to buy also improved, with the gauge for this measure up 3.3 to -4.9, but still remains low by historic standards.
"Whether this can continue depends on whether inflation remains at around 2 percent, close to the European Central Bank’s target. However, a renewed increase in uncertainty, such as from an escalating trade conflict, would likely destroy any further recovery in consumer sentiment," the survey said.
Meanwhile, the economic expectations indicator increased only slightly but still rose to a 10-month high, up 0.3 at 7.2.
“The realignment of the US administration’s trade policy, which began with the announcement of sharp tariff increases shortly before the start of the survey in early April, has apparently not yet had lasting impacts on consumer sentiment in Germany," said Rolf Bürkl, consumer expert at NIM.
"Any negative effects are likely to be mitigated by the successful conclusion of coalition negotiations and the imminent formation of a fully functioning government. It is clearly more important to German consumers at present that a government will be formed quickly. As a result, a key driver of previous uncertainty has lost significance – and the willingness to save has declined accordingly."