BERLIN (Reuters) – The mood among German consumers brightened unexpectedly heading into October to reach its highest level in a year and a half, a survey showed on Tuesday, in a sign that households continue to support the recovery in Europe’s largest economy.

GfK Institute said that its Consumer Sentiment Index, which was based on an October survey of approximately 2,000 Germans rose to 0.3 from a revised figure of -1.1 points one month ago. This reading was compared to a Reuters forecast of -1.6.

GfK reported that both income and economic expectations have improved, while purchasing intentions slightly rose.

The survey revealed that consumers were more positive about the possibility of a fourth pandemic wave, as they saw less coronavirus infection.

Rolf Buerkl, GfK’s consumer expert said that many consumers now see the potential for further restrictions.

Buerkl warned that although consumer sentiment has almost returned to pre-crisis levels, it is still far too early to talk about a major trend shift.

He said, “Instead we need to first observe how the infected situation evolves during winter months and whether new restrictions are necessary.”

The second quarter saw a 1.6% increase in German consumer spending, which was a positive sign for an economy struggling to overcome supply shortages.

Although the German government anticipates that the economy will pick up in the third quarter, business activity in the last three months of 2019 is expected to slow down.

OCT 2021 SEPT 2021 OCT 2020

Consumer climate 0.3 -1.1 -1.7

Consumer climate components SEPT 2021 AUG 2021 SEPT 2020

– willingness to buy 13.4 10.3 38.4

– income expectations 37.4 30.5 16.1

– business cycle expectations 48.5 40.8 24.1

NOTE – The survey period was from Sept. 2-13, 2021.

Forecasts of consumer climate indicate the growth in real private consumption over the next month.

If the indicator is above zero, it indicates year-on–year growth in private consume. Below zero means that there has been a decline in private consumption compared to the previous year.

GfK states that an increase of just one percentage point corresponds to 0.1% annual growth in private consumption.

The indicator of “willingness” represents the mix between negative and positive responses to the question “Do you believe now is the right time to purchase major items?”

The income expectations subindex measures household expectations regarding the future development of their finances over the next twelve months.

Additional business cycle expectations index is a reflection of how people are assessing the economic outlook for the next twelve months.

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