Consumers fear recession: consumer climate is at an "absolute low"

German consumers are pessimistic about the future.

Consumers fear recession: consumer climate is at an "absolute low"

German consumers are pessimistic about the future. Although the downturn in consumer sentiment has slowed, the Ukraine war is still causing widespread uncertainty. In addition, the high inflation is clearly noticeable in many wallets.

The mood of consumers in Germany remains very bad in view of the high inflation. The consumer climate determined by the market research company GfK improved slightly in May, "but is still at an all-time low," explained GfK consumer expert Rolf Bürkl. In April, the GfK index fell to an even lower value than in the first corona lockdown. At least consumer sentiment did not collapse further in May, as Bürkl said. The GfK index reached minus 26.6 points. Market researchers expect minus 26 points for June.

"A sustainable turnaround in consumer sentiment continues to depend on two key factors: on the one hand, the conflict in Ukraine must be ended through successful peace negotiations and, on the other hand, inflation must be noticeably reduced," explained Bürkl. In the case of the latter, it will primarily depend on the European Central Bank to accompany this with an appropriate monetary policy.

According to a GfK survey, consumers still fear a recession. Supply chain problems and a lack of semiconductors are currently preventing a sustained recovery in large parts of the German economy. As a result, the easing of corona-related restrictions could not have the positive effect on the economy that had been hoped for for the time being.

Although consumers' income expectations have improved somewhat, the level remains "remains extremely low", as Bürkl said. In addition to the uncertainty caused by the Ukraine war, the main reason is the high inflation: "Explosively rising energy and food prices are nipping at the purchasing power of households and are currently preventing a better development of the income indicator," explained Bürkl. The tendency to make larger purchases remains correspondingly muted. "High prices for energy and food ensure that less money is available for other purchases."

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 5th to 16th. Consumption is considered an important pillar of economic development in Germany.