The war beats back French and German consumer morale more than expected

FILE PHOTO: A shopper pays with a euro banknote at a market in Nice
FILE PHOTO: A shopper pays with a euro banknote at a market in Nice, France April 3, 2019. REUTERS/Eric Gaillard

March 29, 2022

By Leigh Thomas and Zuzanna Szymanska

PARIS (Reuters) – France and Germany saw consumer confidence fall more than expected this month as government measures to support rising inflation and fuel costs following Russia’s invasion of Ukraine offered little relief, polls showed on Tuesday.

The collapse in consumer morale in the euro zone’s two largest economies has dashed hopes of a recovery following the easing of COVID-19 restrictions.

“In February, hopes were still high that consumer sentiment would recover as pandemic-related restrictions eased. However, the war in Ukraine has shattered those hopes,” said GfK consumer expert Rolf Bürkl in a statement.

In Germany, the GfK Institute said its consumer sentiment index, which is based on a survey of around 2,000 people, fell to -15.5 points in April from a revised -8.5 points the month before and the lowest since February 2021.

Economists polled by Reuters had, on average, expected the index to fall to -14.0.

In France, official statistics agency INSEE said its consumer confidence index fell to 91 from 97 in February, falling short of economists’ expectations of 94 in a Reuters poll.

The result, the lowest since February 2021, bucked an improving trend usually seen ahead of previous presidential elections, when optimism runs high that a new political order will result in improved living standards.

With French voters due to go to the polls next month, the government has unveiled a €25 billion ($27 billion) package of measures to ease the pain of high energy prices and inflation.

But that did little to ease inflation fears, as the proportion of households expecting inflation to rise jumped 50 points to its highest level since the INSEE survey began in 1972.

As part of government action, France has capped increases in gas and electricity prices, made one-off anti-inflation payments to low-income households and offered a rebate on fuel prices.

In Germany, the government coalition agreed last week on a second package of measures in just as many months to relieve people of the sharp rise in electricity, heating and fuel costs.

As part of the €17 billion package, German workers and families will receive additional public money, a tax cut on petrol and discounted public transport tickets.

Deteriorating consumer confidence is far from being confined to France and Germany.

Based on a flash estimate last Wednesday, euro-zone sentiment collapsed to 18.7 points in March, the lowest since the COVID-19 crisis began in April and May 2020.

Italy, the euro zone’s third-largest economy, also saw a larger-than-expected fall in consumer confidence, the national statistics office said last week.

In Belgium, the war in Ukraine caused the sharpest decline in consumer confidence since records began in 1985.

Consumers’ expectations of the general economic situation are at an all-time low and their assessment of their own financial situation and their ability to save has fallen sharply.

($1 = 0.9086 euros)

(Reporting by Leigh Thomas in Paris and Zuzanna Szymanska in Berlin, additional reporting by Phillip Blenkinsop in Brussels; Editing by Raissa Kasolowsky) The war beats back French and German consumer morale more than expected


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