April 23, 2020 / 1:23 PM / a month ago

UPDATE 1-Coronavirus pushes down German consumer morale to record low

 (Adds IfW)
    By Riham Alkousaa
    BERLIN, April 23 (Reuters) - German consumer morale was
driven to a record low heading into May, a survey showed on
Thursday, with the coronavirus pandemic having a far more severe
impact on household spending intentions than forecasters had
estimated.
    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.
    A level below zero indicates an expectation that consumption
will fall from last year. A Reuters poll of analysts had
forecast a smaller 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.
    However, this week stores of up to 800 square metres (8,600
square feet), were allowed to open provided they stick to strict
social distancing rules, a measure the IfW economic institute in
Kiel said was leading to something of a high street revival.
    "Retail can breathe again, this week's easing is bringing a
noticeable alleviation in some areas which you can see from the
number of people in town centres," said IfW President Gabriel
Felbermayr.
    The number of people in Dortmund city centre, in western
Germany, was about 51% of what it would usually be during a
normal working day and other cities were seeing similar numbers,
said the IfW. 
    The situation looked different, though, in other areas such
as the southern state of Bavaria which has the highest number of
coronavirus cases and deaths. The number of people in Munich
city centre amounted to only about 13% of the normal.
    A figure 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."
          
                                 May 20    April 20  May 19
 Consumer climate                -23.4     2.3       10.2
 Consumer climate components     April 20  March 20  April 19
 - willingness to buy            -4.6      31.4      53.1
 - income expectations           -19.3     27.8      56.8
 - business cycle expectations   -21.4     -19.2     3.0
 
    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 and Reinhard Becker
Editing by Peter Graff)
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