Rising prices: consumer climate at historic low

Consumer sentiment in Germany has reached an all-time low. The exploding energy prices and high inflation are even pushing the consumer climate below the previous record low from spring 2020.

Consumer sentiment in Germany deteriorated significantly again in April and reached a new all-time low. This is the result of the current consumer climate study by the Nuremberg research company GfK. Both the expectations of the Germans with regard to the economic prospects and their incomes as well as their desire to buy received a noticeable damper in April. According to the market researchers, this will also be noticeable in May.

More is saved

The GfK index has already fallen by 15.7 points for April – for May minus 26.5 points are now forecast, as the market researchers announced. “The Ukraine war and high inflation have dealt a serious blow to consumer sentiment,” said GfK consumer expert Rolf Bürkl.

The overall situation is more gloomy than it has been since the surveys began in 1991. The bad mood has even fallen below the previous low from April 2020 – the peak of the first corona wave with an initial extensive lockdown, according to GfK. A clearly noticeable increase in the propensity to save in April accelerated the crash again. “In addition to the general uncertainty, the sharp rise in prices in particular is dampening consumer sentiment,” said Bürkl: “If significantly more has to be spent on petrol, heating oil and gas, there are correspondingly fewer financial resources for other purchases.”

risk of recession

“Increased prices of everyday goods are putting constant pressure on wallets. It doesn’t really help consumption if corona restrictions are lifted. The strong real income losses should not be compensated for by wage increases and state aid,” judges Alexander Krüger, chief economist at Hauck Aufhäuser Lampe. Accordingly, the expectations of German consumers with regard to their income development are as bad as they were last in February 2003. “There can only be a lasting trend reversal in the consumer climate if there are successful peace negotiations after the war in Ukraine,” said Bürkl.

At the moment, however, consumers see a real risk of recession: According to the results of the GfK survey, the risk of a prolonged contraction of the economy is rated as high. The market researchers also referred to the economic forecasts for this year, which were recently significantly lowered by economic researchers. The Bundesbank also recently warned of a recession if the war in Ukraine escalated.