Consumer Sentiments in Germany Projected to Hit Historic Low in May, Analytical Group Predicts

MOSCOW (Sputnik) - Consumer sentiments in Germany has suffered a significant setback over the past two month, with a downturn expected to continue in May and reach a historic low of negative 26.5 points, as the fallout from the Ukrainian crisis gain momentum, outpacing the pandemic impact of 2020, Germany-based analytical group GfK said.

"Consumer confidence in Germany deteriorated significantly in April for the second month in a row. Both economic and income expectations along with the propensity to buy have noticeably declined. As a result, GfK is forecasting -26.5 points for the consumer sentiment in May, a decrease of 10.8 points from April of this year (revised from -15.7 points)", GfK said in a press released.

Consumer expectations for income have plummeted the most, hitting the lowest level since February 2003 at -32.8 points.

"High inflation rates are melting away consumers’ purchasing power. As a result, income expectations dropped to -31.3 points in April. This is 9.2 points lower than in March", GfK said.

Furthermore, consumers continue to perceive the risk of recession in Germany as very high. The economic expectations indicator dropped to -16.4 points from -8.9 in March, while last April it logged a positive value of 7.3 points.

Germans’ propensity to buy is also fading, with this indicator dropping to -10.6 in April from -2.1 in March, which is a significant decrease compared to April 2021, when the value exceeded 17 points, GfK said, noting that the April 2022 value is lowest in 13 years, as consumers were less ready to buy only during the global financial crisis of 2008.

"The war in Ukraine and rates of high inflation have dealt a severe blow to consumer sentiment. This means that hopes of a recovery from the easing of pandemic-related restrictions have finally been dashed. There will only be a sustainable trend shift in consumer sentiment if there are successful peace negotiations on the war in Ukraine", GfK consumer expert Rolf Burkl explained.

The inflation rate in Germany indeed has grown greatly, according to the German Federal Statistical Office, accounting for 7.3% in March 2022, thus reaching its highest level since German reunification. The major hikes occurred in energy prices, which in March exceeded the previous year level by 39.5%.