German consumer confidence hits record low as energy bill fears soar
Germans are feeling more frugal than at any point in the last decade, according to a survey by GfK. It found that consumers are putting aside any spare cash in anticipation of much higher energy bills.
The energy crisis and high inflation have pushed German consumer sentiment to a record low, research firm GfK said Friday.
Gfk’s consumer barometer saw a surprising drop of 5.6 points in July to -36.5.
The barometer, from a survey of 2,000 German consumers, has not registered such a low figure since it was created in 1991.
“This month, a sudden increase in the desire to save has seen consumer sentiment continues its steep descent. It has once again reached a new record low,” said GfK consumer expert Rolf Bürkl.
Bürkl added that Germans were putting aside savings for an expected sharp increase in energy costs this winter.
“If households have to pay significantly more for energy and food, they lack the financial means for other purchases,” he said.
Germans on edge over more price rises
Bürkl warned that from a consumer perspective, the risk of a recession remains high, especially if Germany faces gas shortages this winter, which would further drive up heating prices.
The German government is concerned that Russia may fully cut natural gas supplies to Europe in retaliation for sanctions on Moscow over the Ukraine war.
In recent months, Russian gas deliveries have at times been reduced to a trickle.
A separate survey Thursday by researchers Civey for Business Insider magazine found that more than half of Germans are already trying to make energy savings to reduce their bills.
Meanwhile, prices are expected to continue rising into the fall, in part due to a new natural gas surcharge to help energy importers.
While inflation has risen sharply over the past year — standing at 7.5% in July — German residents have benefitted from subsidized public transportation fares and motor fuel over the summer.
Both perks are due to run out at the end of August.
Recession due by end of year
Europe’s largest economy saw zero growth in the second quarter of the year, according to Destatis, the federal statistic agency.
Output has been affected by supply chain issues, soaring energy and food prices, exacerbated by Russia’s invasion of Ukraine.
Business sentiment has also fallen to its lowest level since June 2020, when Germany exited its first COVID-19 lockdown.
The Munich-based Ifo Institute for Economic Affairs said confidence among business leaders dropped to 88.6 in July, from 92.2 in June.
Ifo warned that uncertainty among companies remains high as they expect the economy to shrink in the third quarter.
A separate Ifo survey found falling confidence among German exporters for the third month in a row.
While a majority of industries expect a decline in exports, vehicle manufacturers and their suppliers are looking at significant growth, the think tank said Friday.
German industry is also already making substantial savings in energy usage due to soaring costs and fears of a shortage.
The German Federal Network Agency on Thursday reported a 21.3% fall in consumption by industrial consumers in July, compared to the average of that month in the previous four years.
The government has ordered public buildings to turn down the thermostat and turn lights off at night at tourist attractions.
(AFP, dpa, Reuters)