You’re reading Reaction. To get Iain Martin’s weekly newsletter, columnists including Tim Marshall, Maggie Pagano and Adam Boulton, full access to the site and invitations to member-exclusive events, become a member HERE. 

German consumer confidence has tumbled off a cliff, according to a monthly survey by the Gfk institute, released on Wednesday.

Energy prices have rocketed in Germany, as the war in Ukraine rumbles on into its third month, crushing any hopes of post-pandemic recovery for the German economy.

Gfk’s consumer sentiment index reveals that consumer confidence has fallen to -26.5 points, from a low of -15.7 a month earlier. The barometer, which is based on a survey of over 2,000 members of the German public, is an indicator of how confident consumers are about their own finances, and the state of the German economy more broadly.

Comparatively, in 2020 German consumer sentiment fell to -23.1, in what was then a record low, as Germany suffered through its first lockdown.

Rolf Bürkl, a consumer expert at Gfk, said: “The war in Ukraine and rates of high inflation have dealt a severe blow to consumer sentiment. This means that hopes of a recovery from the easing of pandemic-related restrictions have finally been dashed.”

The future of consumer sentiment is reliant on peace negotiations between Russia and Ukraine, Bürkl added.

The collapse of consumer confidence comes as little surprise, after inflation in Germany reached 7.3% in March, its highest level for over 40 years.