BERLIN, Germany: Consumer sentiment in Germany has taken an unexpected turn for the worse heading into March despite forecasts predicting a slight improvement, according to a new GfK survey released this week.

The consumer sentiment index, which measures households' economic outlook, fell to -24.7 points, down from a revised -22.6 in February. Analysts had expected an improvement to -21.4, but economic uncertainty and political instability appear to have dampened confidence.

The recent election in Germany, where conservatives led by Friedrich Merz secured the most votes but failed to win an outright majority, has added to the economic uncertainty. The results have set the stage for difficult coalition talks, making it unclear what direction the country's economic policy will take.

NIM analyst Rolf Buerkl stressed the importance of forming a government quickly and approving this year's budget to restore confidence.

"This would create important conditions for consumers to be more willing to spend money and to revive consumption," Buerkl said, warning that current figures show no signs of recovery.

One of the biggest concerns for German households remains rising prices and the cost of living crisis. Consumers' income expectations have dropped to their lowest level in 13 months, while willingness to buy has fallen to its lowest point since June 2023.

Economic worries have been exacerbated by reports of factory closures, production moving abroad, and job cuts, which have led many consumers to tighten their budgets.

Germany's economic struggles have also contributed to this declining confidence. In 2024, the country contracted for the second year in a row, making it the worst-performing major economy in the eurozone. The economy also shrank in the final quarter of last year, suggesting little sign of immediate recovery.

The consumer climate index is a key measure of private consumption trends, with negative values indicating a decline in spending. A one-point drop typically translates to a 0.1 percent decrease in private consumption year-on-year.

While analysts hoped that political change could bring a more optimistic outlook, the latest data suggests that economic pressures continue to dominate German consumers' concerns.