BERLIN, (Reuters) – German consumer sentiment is expected to rise in June following a fall to a record-breaking low in May. But high inflation in Germany and the conflict in Ukraine are continuing to impact household spending. A survey was conducted Wednesday.

GfK Institute said that its consumer sentiment index, which is based on an analysis of approximately 2,000 Germans and rose to -26.0 points going into June, after reaching a new all-time low in May of -26.6.

Based on a May 5–16 survey, the most recent reading was within analysts’ expectations according to a Reuters Poll.

Rolf Buerkl from GfK stated that while the “consumer climate” has improved, sentiment about consumers is still low.

He said that despite further relaxations of coronavirus restrictions, “the Ukraine war and most importantly the high inflation continue to weigh heavily on consumers’ moods.”

The institute stated that in order for the trend to reverse, it was necessary to end the conflict through peaceful peace talks. Also, with the assistance of the European Central Bank, the inflation rate should be noticeably slowed down.

Germany’s economic ministry reduced its growth projection for 2022 from 3.6% to 2.2% and forecast that inflation would rise this year to 6.1%.

JUN 2022 MAY 2020 JUN 2021

Consumer climate 26.0-26.6 and 6.9

Climate components for consumers MAY 2022 APR-2022 MAY 2021

– Willingness to purchase -11.1 -10.6 110.0

– income expectations -23.7 -31.3 19.5

Expectations for the business cycle -9.3-16.4 41.1

Note: This survey was conducted between May 5 and 16, 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 says that a change of one point in the indicator equals 0.1% annual change in private consumption.

The “willingness-to-buy” indicator is the ratio of positive and negative responses.

The income expectations subindex represents household expectations regarding the future development of their finances over the next twelve months.

This index also includes additional business cycle predictions. It is a reflection of how people assess the economy’s future.