• Prior -28.0; revised to -28.1

The German consumer climate worsens to a three-year low as the fallout from the Middle East conflict continues to take a toll on Europe’s largest economy.

In particular, higher energy prices and in turn higher inflation is translating into a major worry for German households. And that is reflected by a nosedive in income expectations, which fell from -6.3 in April to -24.4 going into May. Economic expectations also declined further, down from -6.9 in April to -13.7 going into May.

On the latter, we’re pretty much circling levels last seen back during the Russia-Ukraine crisis in 2022. So, that’s a clear enough signal to how dire the outlook is as we look to the months ahead. And especially as the Middle East conflict shows no signs of easing just yet.

GfK notes that:

“Income expectations are collapsing as a result of rising inflation. Against this backrop, people also consider the current time to be less favourable for major purchases.”