German consumer morale falls to historic low heading into May

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.

"A very decisive point for the gloomy consumer mood is the current inflation, which is being primarily driven by energy prices. We have seen drastic price increases for heating oil, gas and petrol in recent weeks. As a result, inflation in Germany is currently at over 7%. That is the highest level we have seen in 40 years," GfK consumer expert Rolf Buerkl said.

"So a very important point and also a prerequisite for a noticeable and sustainable recovery of the climate is certainly the war in Ukraine. First of all, of course, there must be a ceasefire, followed by peace negotiations. Only when calm returns will consumers be more willing to spend more money again because the uncertainty will recede. And certainly, some price increases will then subside again or be reversed. If we achieve a bit of normality here again," Buerkl added.

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.

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.