War and inflation sink German consumer confidence to record lows, says GfK

MADRID, 28 Jun. (EUROPA PRESS) -

German consumer confidence is being severely affected by the war in Ukraine and high levels of inflation, which points to a further drop in the GfK indicator to a low of -27.4 points, compared to -26 .2 from the previous month, its worst reading since the beginning of the historical series in 1991.

"The war in Ukraine and disruptions to supply chains are causing energy and food prices in particular to skyrocket, resulting in a consumer climate gloomier than ever," said Rolf Bürkl, consumer expert. from GfK.

"Above all, the increase in the cost of living, which is almost 8% today, is weighing heavily on consumer confidence and causing a downward spiral," he added.

After a brief recovery in May, economic expectations have worsened again this month. The corresponding indicator has fallen 2.4 points to -11.7 points, as consumers continue to see a significant risk of the German economy slipping into recession.

Likewise, income expectations have continued to fall in June. Specifically, the indicator has dropped 9.8 points, to -33.5 points, the lowest value in almost 20 years, due to the impact of inflation on the purchasing power of households.

In this way, the financial resources saved during the Covid-19 lockdown will probably no longer be used to purchase to the desired extent and the domestic economy will suffer in the coming months.

As a consequence of the deterioration in economic and income expectations, consumers' propensity to buy has also decreased, with the indicator falling 2.6 points to a current value of -13.7, the lowest since October 2008.

Thus, for Bürkl, in addition to putting an end to the war in Ukraine, the key factor for a sustained change in consumer confidence would be a reduction in inflation rates, for which the European Central Bank must provide support with an adequate monetary policy. , although the measures implemented must be carefully considered to prevent an overly restrictive policy from plunging the German economy into a recession.