BERLIN (Reuters – German consumers are expected to sink to a historical low in May, as rising costs and the conflict in Ukraine threaten to devastate hope of a recovery after the pandemic.

GfK Institute said that its consumer sentiment indicator, which is based upon a survey of about 2,000 Germans fell to 26.5 points going into May, from an earlier revised 15.7 points. The key indicator also dropped even further after the first COVID-19 lockdown in May 2020, when Germany was at the top of the COVID-19 list.

Reuters analysts polled had expected that the index would drop to -16.0.

Consumer sentiment has been severely affected by the war in Ukraine, as well as high rates of inflation. “This means that any hopes for a recovery due to the easing pandemic-related restraints have now been lost,” Rolf Buerkl, GfK consumer expert Rolf Buerkl stated in a statement.

According to GfK, Russia’s February 24 invasion of Ukraine has triggered an increase in energy costs and severe sanctions that have been imposed on Moscow. This, according to GfK.

It was also noted that the April increase in saving behavior in consumers accelerated this drop in consumer mood.

Buerkl explained that there would be only a sustained shift in consumer attitudes if peace negotiations are successful in Ukraine.

Surveys were conducted from March 31 through April 11.

GfK released the report as German government prepared to release its latest economic forecasts Wednesday. According to Reuters, a source within the government said that Berlin would reduce its 2022 growth projections for Europe’s largest economy from 3.6% to 2.2% due to Ukraine war.

MAI 2022 APR 2022 MAI 2021

Climate for consumers -26.5-15.7 -8.6

Components of the consumer climate APR 2022, MAR 2022, APR 2021

– Willingness to purchase -10.6-2.1 17.3

– income expectations -31.3 -22.1 9.3

Expectations for the business cycle -16.4 – 8.9 7.3

Note: This survey was conducted between March 31 and April 11, 2022.

The indicator of consumer climate forecasts real consumption growth over the coming month.

If the indicator is above zero, it indicates year-on–year growth in private consumer consumption. Below zero means that the indicator is showing a decrease in consumption relative to the same time last year.

GfK states that an increase of just one percentage point in this indicator would correspond to 0.1% growth in private consumption over the previous year.

The “willingness-to-buy” indicator is an equal balance of positive and negative responses.

The Income Expectations sub-index measures household financial expectations for the next 12 months.

An additional index of business cycle expectancies reflects an assessment by those who were questioned about the economic outlook for the next twelve months.