BERLIN (Reuters) - German consumer moral reached a record low heading into May as the coronavirus pandemic and measures to contain the outbreak slammed the mood among shoppers, a survey showed on Thursday.
The GfK consumer sentiment indicator, based on a survey of 2,000 Germans, entered negative territory, dropping to -23.4 points from a revised 2.3 in the previous month.
The reading undershot a Reuters poll of analysts who had forecast a much less significant drop to -1.8.
“The consumer climate is currently in free fall,” Rolf Buerkl, a researcher for Nuremberg-based GfK, said in a statement, adding that a value of -23.4 was unprecedented in the history of the consumer climate survey.
“Retailers, manufacturers and service providers must prepare for an imminent, very severe recession,” Buerkl said. Consumer sentiment would remain subdued in the coming months as measures to curb the outbreak would be eased only slowly.
The drop was exacerbated by a spike in consumers’ propensity to save in the crisis, GfK said.
Production shutdowns, shops’ closures and supply chain disruptions forced many companies to put employees on short-time work schemes, hitting consumers’ income and economic expectations, the survey showed.
A subordinator for consumers’ income expectations in April recorded the biggest drop since the survey started in 1980.
“The fear of job loss has risen sharply among many employees,” Buerkl said. “This is a significant barrier to consumption, which is intensified by the fact that closed shops often make it impossible to buy stuff.”
NOTE - The consumer climate indicator forecasts the development of real private consumption in the following month. An indicator reading above zero signals year-on-year growth in private consumption. A value below zero indicates a drop in comparison with the same period a year ago.
According to GfK, a one-point change in the indicator corresponds to a year-on-year change of 0.1 percent in private consumption.
The “willingness to buy” indicator represents the balance between positive and negative responses to the question: “Do you think now is a good time to buy major items?”
The income expectations sub-index reflects expectations about the development of household finances in the coming 12 months. The additional business cycle expectations index reflects the assessment of those questioned of the general economic situation in the next 12 months.
Reporting by Riham Alkousaa, editing by Michael Nienaber