Germans hesitant to widen wallets as inflation eases

German consumers remain cautious as inflation eases

Even though price pressures have softened in Germany, shoppers are still reluctant to spend.

Inflation levels continue to worry

• Annual consumer price inflation has been between 1.6 % and 2.6 % over the past year, far below the 70‑year peak reached in 2022.
• Prices still sit roughly 20 % above 2020 levels, and households complain about high costs for electricity, groceries and leisure.
• Students and hobbyists have to cut back; a three‑day festival pass now costs 220 € (more than double the 2019 price).
• Germany’s Greens MPs suggested a 50‑cent ice‑cream price cap to keep treats affordable for children from lower‑income families.

Shoppers are not buying back

• GfK and NIM’s May survey shows saving rates are on the rise.
• Consumer sentiment remains extremely low, blaming the unpredictable trade policy of U.S. President Donald Trump and concerns about Germany’s weak domestic economy.
• Official retail sales fell in March, April and May, indicating that shoppers are still hesitant.

Why do consumers stay cautious?

• Worries about Trump’s tariff blitz and the crisis‑wrenched domestic economy keep sentiment low.
• Experts say it can take one to five years for consumer perception to match reality.
• In December, 3,000 people surveyed by the IW research institute estimated 2024 inflation at 15.3 %—while the real figure was only 2.2 %.
• The gap is wider among radical party supporters, such as the far‑right AfD and far‑left BSW.
• Historical experience left Germans with a deep aversion to rising prices after the 1920s hyperinflation that paved the way for the Nazis.
• A recent survey by an army research centre found Germans fear rising prices more than a war between the West and Russia.

Why should consumers spend more?

• Increasing consumer spending is crucial to revive the eurozone’s traditional powerhouse economy.
• A stronger domestic demand can offset prolonged weakness in the manufacturing sector, which has historically been a key source of growth.
• Although memory of the inflation surge remains raw, consumers are unlikely to increase spending any time soon.
• Lisa Voelkel of the Federation of German Consumer Organisations said, “People may suspect that, since the news has constantly been repeating in recent years that everything is more expensive, it is indeed still getting more expensive.”