Title: German consumer sentiment plunges to new record low

Jun 28, 2022 02:11AM ET

By: AnalysisWatch

A survey showed on Tuesday that consumer sentiment in Germany is expected to fall to record lows in July as the war in Ukraine and disrupted supply chains push up energy and food prices further.

The GfK institute said its consumer sentiment index, based on a survey of about 2,000 Germans, fell to -27.3 points in July after a brief recovery in June with a revised reading of 26.2 points.

The ongoing war in Ukraine and disruptions in supply chains are leading to a sharp rise in energy and food prices, resulting in a gloomier consumer climate than ever before.

According to a Reuters poll, the latest drop in consumer morale, based on a survey from June 2 to 13, is not as severe as analysts' forecast of-26.7 points.

Inflation in Germany rose to 8.7 percent in May, its highest level in nearly half a century, as the fallout from Russia's invasion of Ukraine built on existing difficulties caused by the pandemic.

-27.4-26.2-0.3 Consumer Climate

Components of the consumer climateJune 2021, May 2022

inclination to purchase -13.4 -11.8 13.3

income projections-30.2-30.7-30.8

Business cycle expectations: -11.6 -11.5 52.2

The consumer climate indicator forecasts the development of real private consumption over the next month.

A reading of the indicator above zero signals a year-on-year increase in private consumption. A reading below zero indicates a decline compared to the same period a year earlier.

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

The "income expectations" sub-index reflects expectations about the development of household finances over the next 12 months.

The supplementary index of business cycle expectations reflects respondents' assessment of the general economic situation over the next 12 months.