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Income optimism boosts German consumer sentiment in May, finds GfK

People shop during Black Friday deals at consumer electronics retailer Media Markt near Alexander Platz square in Berlin

BERLIN (Reuters) - German consumer sentiment is set to rise in May on the back of households' brighter income expectations, continuing a path of recovery that has been slow-going due to uncertainty about the country's economic development, a survey showed on Thursday.

The consumer sentiment index published jointly by GfK and the Nuremberg Institute for Market Decisions (NIM) rose to -24.2 heading into May from a slightly revised -27.3 in April.

That reading, the third increase in a row, beat the expectations of analysts polled by Reuters of -26.0 and marks a two-year high, though sentiment still remains extremely low.

Income expectations were a bright spot, climbing 12.2 points to 10.7, boosted by falling inflation and rising wages.

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"Our analyses indicate that income expectations are primarily based on real income development. And the signals here are definitely positive," said NIM consumer analyst Rolf Buerkl.

The willingness to buy benefited only moderately from the jump in income expectations, rising 2.7 points to -12.6, as households put their money aside due to pronounced uncertainty about the economic development of Europe's biggest economy.

MAY 2024 APR 2024 MAY 2023

Consumer climate -24.2 -27.3 -25.8

Consumer climate components APR 2024 MAR 2024 APR 2023

- willingness to buy -12.6 -15.3 -13.1

- income expectations 10.7 -1.5 -10.7

- business cycle expectations 0.7 -3.1 14.3

NOTE - The survey period was from April 4-15, 2024.

The consumer climate indicator forecasts the progress of real private consumption in the following month.

An indicator reading above zero signals year-on-year growth in private consumption. A value below zero indicates a drop compared with the same period a year earlier.

According to GfK, a one-point change in the indicator corresponds to a year-on-year change of 0.1% in private consumption.

The "willingness to buy" indicator represents the balance between positive and negative responses to the question: "Do you think now is a good time to buy major items?"

The income expectations sub-index reflects expectations about the development of household finances in the coming 12 months.

The additional business cycle expectations index reflects respondents' assessment of the general economic situation over the next 12 months.

(Reporting by Miranda Murray, Editing by Rachel More)