Leigh Thomas and Zuzanna Symanska

PARIS (Reuters), – France, Germany and Spain saw larger than anticipated drops in consumer confidence in February as the government’s measures to reduce rising fuel and inflation costs proved ineffective in the aftermath of Russia’s invasion.

After COVID-19 restrictions were lifted, consumer sentiment in two of the largest economies of the eurozone was bleak.

In February there were high hopes that consumers would feel better after the lifting of restrictions related to pandemics. These hopes were crushed by the conflict in Ukraine,” Rolf Buerkl, GfK’s consumer expert, stated in a statement.

The GfK Institute in Germany reported that its Consumer Sentiment Index, which is based on an estimate of around 2000 people, fell to -15.5 from a revised +8.5 points one month prior and was the lowest reading since February 2021.

Reuters polled economists and found that they expected the index would fall to -14.0.

France: The official statistics agency INSEE reported that the index of consumer confidence fell to 91 points in February from 97. It was lower than economists expected in a Reuters poll.

The lowest result since February 2021 was in spite of an improvement trend normally observed before previous presidential elections, when optimism runs high about a new order that will bring better standards of living.

French voters are due to go to the polls next month. The government has prepared a set of measures in the amount of 25 billion euros (or $27 billion), to help ease inflation and the high prices of energy.

However, this did not ease inflation fears as the percentage of households anticipating an increase in inflation rose 50 points to their highest point since 1972 when INSEE began its survey.

France, as part of its government actions, has limited increases in power and gas prices and made anti-inflation payments to households with low incomes. It also offered a rebate for fuel prices.

The ruling coalition in Germany agreed to a second set of measures last week, which will be implemented over the next few months, to help people get some relief from rising fuel, power and heating costs.

German families and workers will be eligible for extra cash and a cut in the tax on petrol under the package worth 17 billion euros.

France and Germany are far from the only countries experiencing a decline in consumer confidence.

A flash estimate from Wednesday last week showed that eurozone sentiment fell to 18.7 points in March, which is the lowest point since April 2019 and May 2020, respectively, according to the COVID-19 crisis.

The third largest economy in the Euro zone, Italy, saw a greater than expected drop in consumer confidence according to last week’s national statistics office.

Belgia’s Ukraine war caused the largest drop in consumer confidence records since 1985.

Expectations for the economic state are at an all time low. Consumers’ views about their financial position and ability to save money have also fallen.

($1 = 0.9086 euros)