Consumer confidence rose for the third month in a row in Europe's largest economy, according to a market research survey. Germany is seeing mild economic improvement after grappling with slow growth and inflation.

According to a market research survey released on Thursday, German consumer confidence increased for the month of May. The survey was jointly published by the GfK market research company and the Nuremberg Institute for Market Decisions (NIM).

According to the survey, consumer confidence increased by 3.1 points to -24.2 heading into May, surpassing the expected rate of -26 as forecasted by experts interviewed by the Reuters news agency. This marks the third consecutive monthly increase, with the GfK noting that its barometer reached a "two-year high."

The upturn was fueled by growing income expectations following wage agreements negotiated by unions across various sectors of the German economy. Rolf Bürkl, a consumer expert at NIM, stated that wage hikes, coupled with a recent decline in the inflation rate, are bolstering purchasing power among private households.

Bürkl also noted a trend of German consumers investing in more expensive items such as cars and furniture.

However, he emphasized that Germans' willingness to make purchases remained significantly lower than pre-pandemic levels, reflecting the sharp decline in consumption during the lockdowns of 2020 and 2021.

Moreover, the German economy has been grappling with inflation and escalating energy costs since the onset of Russia's conflict in Ukraine.

The survey coincided with several improved indicators for Europe's largest economy, which has been contending with inflation and sluggish growth.

Germany raised its economic forecast for the year to 0.3% growth on Wednesday, up 0.2 percentage points from the previous prediction, citing increased private consumption as the primary reason for the adjustment.

Additionally, the inflation outlook for 2024 was revised downward from 2.8% to 2.4%.

Economy Minister Robert Habeck noted, "The decrease in inflation will stimulate consumer demand — individuals will have more disposable income, leading to increased spending," in reference to the change in Berlin's economic outlook.