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, according to a survey.
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. That marked a drop below the previous record low 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.
Explosion In Energy Prices
Russia's invasion of Ukraine on 24 February 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.
"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 was conducted between 31 March and 11 April.
The GfK report came just hours before the German economy ministry slashed its economic growth forecast for 2022 to 2.2% from its late January prediction of 3.6%, with inflation seen at 6.1% this year.
Earlier in this month, the president of Germany's Federal Association of Wholesale, Foreign Trade and Services (BGA), Dirk Jandura, said "a swift end to the current price pressures facing businesses and consumers is "not foreseeable".