German Consumers Not Yet Ignited By Merz Magic

By Carsten Brzeski of Think.ING

Chief Economist at ING Germany • Jun 26, 2025 at 2:50 AM EDT

German consumer confidence remains muted as the government's fiscal plans are mainly aimed at businesses, not households – yet.

Black and Gray Laptop Computer

Image Source: Pexels

While German business confidence has increased every month since the start of the year on growing optimism that the new government will bring back growth, consumers remain sceptical. The just-released GfK consumer climate index dropped to -20.3 in June, from -20.0 last month.

Since the start of the year, consumer confidence has shown minimal improvement. While consumers share the growing business optimism, inflation fears and a higher propensity to save are weighing on confidence.

Private consumption outlook remains subdued

Private consumption surprised to the upside in the first quarter of the year. However, looking at the bigger picture, private consumption has not yet fully recovered from the energy price shock in 2022. In fact, the worsening of the labour market and increased geopolitical uncertainty are still concerning German consumers.

Looking ahead, recent business optimism on the back of the new government’s investment plans has not yet ignited consumers. German consumers’ reluctance to open their wallets is actually not the result of excessive caution or fearmongering but a very rational behaviour. Up to now, the government’s fiscal stimulus plans have been almost exclusively aimed at companies, not households. It will need another turning of the labour market (to the positive) and a significant improvement in purchasing power before private consumption can substantially pick up again.

More By This Author:

South Korea’s Business Sentiment Stalled Amid Middle East Conflict Concerns
The Commodities Feed: Calm, For Now
FX Daily: Refocusing On US Macro

Disclaimer:

This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. ING forms part of ING Group (being for this purpose ING Group NV and its subsidiary and affiliated companies). The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.

The distribution of this publication may be restricted by law or regulation in different jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions.

Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved. ING Bank N.V. is authorised by the Dutch Central Bank and supervised by the European Central Bank (ECB), the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). ING Bank N.V. is incorporated in the Netherlands (Trade Register no. 33031431 Amsterdam). In the United Kingdom this information is approved and/or communicated by ING Bank N.V., London Branch. ING Bank N.V., London Branch is deemed authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.. ING Bank N.V., London branch is registered in England (Registration number BR000341) at 8-10 Moorgate, London EC2 6DA. For US Investors: Any person wishing to discuss this report or effect transactions in any security discussed herein should contact ING Financial Markets LLC, which is a member of the NYSE, FINRA and SIPC and part of ING, and which has accepted responsibility for the distribution of this report in the United States under applicable requirements.

Comments

Back to all articles