German consumer confidence rises unexpectedly on improved income outlook

Consumer confidence in Germany rose more than expected heading into September, supported by improved income expectations and a slight decline in willingness to save, data released Thursday showed.

The forward-looking Consumer Climate Index, prepared by the Nuremberg Institute for Market Decisions and powered by GfK, increased 2.8 points to minus 26.6 for September.

Analysts had expected the index to remain unchanged.

Income expectations rose 16.2 points to 1.7, reaching their highest level in six months and providing the main boost to overall consumer sentiment.

Consumers also became more optimistic about Germany's economic outlook. The economic expectations indicator gained 2.4 points to minus 3.9, marking its fourth consecutive monthly increase.

Although the indicator remained more than six points below its year-ago level, the latest increase pointed to "a slight upward trend," said Rolf Buerkl, head of consumer climate at the institute.

"Signals from the economy are also generally positive," Buerkl said, adding that gross domestic product "performed better than expected" in the second quarter.

Germany's economy expanded 0.3% in the April-June period, according to the data.

The recent improvement in the Ifo Business Climate Index and purchasing managers' index readings also indicated a modest expansion in economic activity.

Despite the marked recovery in income expectations, German consumers remained reluctant to make major purchases such as furniture and electronic appliances.

The willingness-to-buy indicator was virtually unchanged at minus 9.8 and has remained close to minus 10 for about four years.

Meanwhile, the willingness-to-save indicator declined 1.5 points to 15.5 but remained at a relatively high level and was broadly unchanged from a year earlier.

The monthly survey is based on interviews with around 2,000 consumers conducted on behalf of the European Commission.

The September consumer climate reading is calculated using income, purchasing and saving expectations recorded in August.