German Consumer Confidence Is Expected to Halt Its Downward Trend in February

January 27, 2022 at 02:14 am EST

By Maria Martinez

Consumer sentiment in Germany is expected to edge up in February despite rising inflation and a surge in Covid-19 cases, according to GfK on Thursday.

GfK's forward-looking consumer sentiment index forecasts confidence among households rising to minus 6.7 in February from a revised figure of minus 6.9 in January. Economists polled by The Wall Street Journal anticipated a drop to minus 8.0 points.

Consumers are once again showing some optimism at the start of the year, as they are hoping for a slight alleviation in price trends. This is because in January 2022 the base effect resulting from the January 2021 reversal of the VAT cut will mitigate inflation to some degree, said Rolf Buerkl, consumer expert at the market-research group.

"Nevertheless, consumers' price expectations remain significantly higher than in recent years", Mr. Buerkl said.

GfK uses data from three subindexes from the current month to derive a sentiment figure for the coming month, measuring consumers' economic expectations, income expectations and propensity to buy. In January, the three indicators increased.

Economic expectations rose to 22.8 in January from 17.1 points in December, following three consecutive declines.

The German economy grew 2.7% last year and is expected to accelerate even further in 2022, with private spending playing an important role, GfK said.

The income expectation indicator rose to 16.9 in January from 6.9 in the previous month.

"This means that the outlook on income is defying the recent steep rise in prices," the market-research group said.

Propensity to buy increased to 5.2 in January from 0.8 in December.

Write to Maria Martinez at maria.martinez@wsj.com