BERLIN (Reuters) - German consumer morale is projected to plunge to a historic low in May as the war in Ukraine leads to soaring costs for households and dashes hopes of a post-pandemic recovery, a survey showed on Wednesday.
The GfK institute said its consumer sentiment index, based on a survey of around 2,000 Germans, dropped to -26.5 points heading into May from a revised -15.7 points a month earlier, as the key indicator fell even further than the previous record set in May 2020 during Germany's first COVID-19 lockdown.
Analysts polled by Reuters had on average expected the index to drop to -16.0.
"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," GfK consumer expert Rolf Buerkl said in a statement.
The war, which began with Russia's invasion of Ukraine on Feb. 24, has led to an explosion in energy prices and far-reaching sanctions on Moscow, both of which have diminished consumers' spending power, the GfK said.
The drop in consumer sentiment was accelerated by a significant increase in the propensity to save in April, it added.
"There will only be a sustainable trend shift in consumer sentiment if there are successful peace negotiations on the war in Ukraine," Buerkl said.
The survey took place from March 31 to April 11.
The GfK report came as the German government was set to present its updated economic forecasts on Wednesday. Berlin will cut its growth forecast for Europe's biggest economy for 2022 to 2.2% from 3.6% amid the war in Ukraine, a government source told Reuters on Friday.
MAY 2022 APR 2022 MAY 2021
Consumer climate -26.5 -15.7 -8.6
Consumer climate components APR 2022 MAR 2022 APR 2021
- willingness to buy -10.6 -2.1 17.3
- income expectations -31.3 -22.1 9.3
- business cycle expectations -16.4 -8.9 7.3
NOTE - The survey period was from March 31 to April 11, 2022.
The consumer climate indicator forecasts the development 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 ago.
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 the assessment of those questioned of the general economic situation in the next 12 months.