By Maria Martinez

 

German consumer sentiment is set to plunge in April due to the significant increase in the number of coronavirus cases in Germany and the accompanying containment measures, market-research group GfK said Thursday.

"In light of the current development, we are withdrawing our consumer forecast of one percent growth for 2020. Retailers, manufacturers and service providers must prepare for a recession," said Rolf Buerkl, consumer expert at GfK.

GfK's forward-looking consumer-sentiment index is set to drop to 2.7 points in April from a downwardly revised 8.3 points for March. This would be its lowest level since May 2009, at the time of the financial and economic crisis, when the consumer climate fell to 2.6 points.

Economists surveyed by The Wall Street Journal had forecast a score of 7.5 points for April, before stricter containment measures were implemented in Germany.

"A reliable forecast regarding consumption can only be made once we can predict how long the protective measures to combat corona will remain in place," Mr. Buerkl said.

GfK uses data from three sub-indexes from the current month to derive a sentiment figure for the coming month. In March, both economic and income expectations, as well as propensity to buy are expected to suffer heavy losses, GfK said.

"Consumers expect very tough economic times ahead for Germany," Mr. Buerkl said.

Economic expectations fell to minus 19.2 in March from 1.2 in February, as the German economy has come to a complete halt in a very short space of time, GfK said. A lower figure was last recorded in August 2012, when the indicator stood at minus 20.0 points.

"The threat of significantly reduced hours and an increase in unemployment figures are now hammering away at consumer sentiment," GfK said.

A plummeting economic outlook is also leading to heavy losses for income expectations, which fell to 27.8 in March from 41.2 in February.

The propensity-to-buy measure went down to 31.4 points in March from 53.6 points in February. GfK said this loss of some 22 points within a single month is a historic one.

GfK pointed out that the survey was carried out between March 4 and March 16 and therefore a large number of respondents were not yet aware of the closures of businesses and production shutdowns.

Although retail as a whole is facing tough times ahead, GfK noted that the coronavirus provided drug and grocery stores with a jump in sales of 14% in February compared to the same month last year, driven by stock-piling purchase behavior.

"This trend will also persist into March and potentially the following months, as the 'shut-down' of public life isn't only leading to stock-piling, but also to a relocation of out of home consumption to people's private homes, causing an increase of sales in grocery stores compared to the previous year," said Robert Kecskes, retail expert at GfK.

 

Write to Maria Martinez at maria.martinez@wsj.com

 

(END) Dow Jones Newswires

March 26, 2020 03:14 ET (07:14 GMT)

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