Consumer sentiment in Germany has fallen to a new record low. According to the research company GfK, this is due to rising prices and the war in Ukraine.
The consumer climate index of the Nuremberg Society for Consumer Research (GfK) signals a decline of 1.2 points to minus 27.4 points for July. This is the lowest value since the beginning of the all-German survey in 1991, as GfK announced on Tuesday. In particular, the increase in the cost of living, which is currently almost eight percent, is “depressing consumer sentiment and sending it plummeting,” explained GfK.
For its representative studies on the consumer climate, GfK conducts monthly interviews with consumers about their economic expectations, their income expectations and their propensity to buy. For the current survey, around 2000 people were interviewed from May 2nd to 13th. Consumption is considered an important pillar of economic development in Germany.
Weak domestic economy
“The ongoing war in Ukraine and disrupted supply chains are causing energy and food prices in particular to explode and making the consumer climate more gloomy than ever,” explained GfK consumer expert Rolf Bürkl on Tuesday.
The high inflation is depressing the mood, according to Bürkl, the purchasing power is melting away. The hope that the savings accumulated during the pandemic would be converted into purchases will probably not be fulfilled. “If private households have to pay significantly more for energy and food, there are correspondingly fewer financial resources, especially for larger purchases,” says a GfK press release.
As a result, the domestic economy will also suffer in the coming months. Bürkl called on the European Central Bank to adopt a moderate monetary policy. Inflation must be pushed back. However, the economy should not be choked off by excessive jumps in interest rates.
Also for the “export champion” Germany domestic consumption is an important economic factor
No mood lifter in sight
The GfK barometer fell for the fifth time this year. In addition to an end to the war in Ukraine, it is particularly important for a sustainable trend reversal in the consumer climate that the inflation rate will decrease from the current 7.9 percent, the market researchers explained. It doesn't look like that for the time being. According to a new forecast by economists, when the Federal Statistical Office publishes the inflation data for June on Wednesday, the value should rise to 8.0 percent.
“Where should consumers still be in a good mood? The bill is higher with every trip to the supermarket than with the previous purchase,” commented DekaBank economist Andreas Scheuerle on the development. “Consumers are not only massively losing their purchasing power in real terms and can therefore afford less. They feel even poorer than they actually are because the inflation they feel in daily consumption is many times higher than the officially measured inflation rate.”
Alexander Krüger, chief economist at the private bank Hauck Aufhäuser Lampe, said the bad buying mood of consumers is not likely to change any time soon: “As long as there is a threat of further increases in energy prices”.
General fear of recession
The Germans Meanwhile, consumers see “a great risk that the German economy could slide into recession,” explained GfK. Supply chain problems and the Ukraine war are also currently hampering production in Germany.
In addition, private consumption, an important pillar of economic growth, is threatening to fail due to high inflation. Income expectations continued their steep descent in June and, at minus 33.5 points, slipped to their lowest value in almost 20 years.
Willingness to make larger purchases also fell. This so-called propensity to buy fell to minus 13.7 points – a lower value was last measured during the financial and economic crisis in October 2008.
dk/bea (dpa, rtr, afp)