By Ed Frankl

Consumer confidence in Germany improved for the second-straight month in data for January, as income expectations jumped, despite a still-subdued outlook for the country's economy.

Germany's forward-looking consumer-sentiment index forecasts confidence to improve to minus 25.1 in January, from minus 27.6 in December, according to data published Wednesday by market-research group GfK and the Nuremberg Institute for Market Decisions.

The reading compares with expectations that the index would improve by less, to minus 27.0, according to a consensus of economists polled by The Wall Street Journal.

However, it remains to be seen whether the improvement represents the start of a sustained recovery in consumer sentiment, according to Rolf Buerkl, consumer expert at NIM.

"Consumers still have major worries. Geopolitical crises and wars, sharply rising food prices and discussions around national budget for 2024 continue to cause uncertainty. As a result, the level of consumer sentiment is currently still very low," he said.

Nevertheless, the three subindexes GfK used to derive an overall sentiment figure for January all rose.

Income expectations, in particular, drove the overall improvement, rising to minus 6.9 from minus 16.7, helped by a higher optimism on wages and pensions, GfK said.

Willingness to buy also climbed 6.2 points to minus 8.8, thought it remains under the level during Covid-19 lockdowns, indicating the current level of consumer uncertainty, the survey said. Finally, the measure for willingness to save ticked up to a positive reading of 7.3 from 5.3.

However, with a stagnant economy and uncertainty about the government's budget for the year ahead, German consumers face challenges. The country's central bank, the Bundesbank, expects the economy to contract in the final quarter of the year, and sees sluggish growth of 0.4% in 2024 as a whole, according to updated forecasts published last week.

Write to Ed Frankl at edward.frankl@wsj.com

(END) Dow Jones Newswires

December 20, 2023 02:14 ET (07:14 GMT)