German consumers are increasingly gaining the impression that the economy will recover soon.
That's the conclusion from a survey published on Thursday (July 23).
The consumer sentiment index published by the GfK institute showed morale improved more than expected heading into August.
Shoppers were given a boost from a temporary cut in VAT as part of the government's stimulus package.
The index rose to -0.3 from a revised -9.4 in the previous month.
This was the third monthly increase in a row, beating forecasts.
Consumers' propensity to buy and their personal income expectations both improved for a third consecutive month.
GfK Researcher Rolf Buerkl said the news resembled a V-shaped recovery:
"There are several factors at play. In spring we had an absolute low point, a real state of shock and now we are partly seeing a consolidation of consumer morale. Then, of course, the easing of restrictions towards a new normality plays a role too. And this is all supported by government stimulus measures."
But he cautioned that consumers might scale back purchases once the reduced VAT rates expire in January.
The reduction will cost the federal government up to 20 billion euros, or over 23 billion dollars, in total.
The improvement in Europe's biggest economy is dependent on the country's infection rate remaining low.
The institute added that "a second lockdown would quickly shatter any hope of recovery".