Title: German consumer morale inches up after falling to record low

May 25, 2022 02:31AM ET

By: AnalysisWatch

A survey showed on Wednesday that German consumer morale is expected to improve after falling to a record low in May, but high inflation and the war in Ukraine continue to weigh on household spending.

The GfK institute said its consumer sentiment index, based on a survey of around 2,000 Germans, rose slightly to 26.0 points in June after an all-time low of 26.6 points in May.

A Reuters poll showed the latest reading, based on a survey from May 5–16, was in line with analysts' expectations.

The institute said a sustained reversal of the downward trend would require a successful conclusion of the peace talks conflict and a marked slowdown in the pace of inflation, with the help of the European Central Bank.

At the end of last month, the German Economy Ministry cut its forecast for economic growth in 2022 from 3.6% to 2.2% and projected inflation to reach 6.1% this year.

The consumer climate indicator forecasts next month's developments in real private consumption.

A reading above zero indicates that private consumption has increased over the year. A value below zero indicates a decrease compared to the same period last year.

According to GfK, a one-point change in the indicator corresponds to a 0.1% annual change in private consumption.

The Income Expectations sub-index measures households' financial expectations over the next 12 months.

The sub-index on business cycle expectations shows how respondents assess the general economic situation over the next 12 months.