German consumer sentiment falls to lowest since February 2023 as energy costs and inflation bite
German consumer sentiment falls to its lowest level since February 2023, with the HDE Consumer Barometer dropping to 92.3 in May as rising energy prices and mounting worries about the economy erode household confidence. The index, based on a survey of 1,600 people, recorded a monthly decline of 2.6 points—the steepest one-month fall since January 2024—signalling weaker planned spending in the months ahead. Retail activity has already shown strain, and official data point to higher consumer prices driven mainly by energy, adding pressure to an economy with only modest growth in early 2026.
HDE Consumer Barometer Falls to 92.3 in May
The Retail Association of Germany (HDE) reported the Consumer Barometer value of 92.3 for May, measured against a 2017 reference value of 100. The figure reflects expectations about purchases, saving intentions and personal finances rather than actual transactions, and it fell by 2.6 points versus April.
The HDE noted that this is the lowest reading since February 2023 and comes after unusually volatile readings in recent years, including a trough of 84.1 during the energy crisis in October 2022. The barometer’s changes are interpreted as an early indicator of household behaviour in coming months.
Energy prices and the Iran conflict weigh on households
The HDE pointed directly to elevated energy costs as a dominant factor depressing consumer mood, linking uncertainty over energy markets to geopolitical tensions in the Middle East. The association warned that, unless the conflict involving the United States and Iran ends, energy prices are likely to remain elevated and could continue to affect global growth.
Analysts cited by the HDE said that even a cessation of hostilities would not immediately normalise energy markets, with effects on prices expected to persist for months. Households facing higher fuel and electricity bills are therefore more likely to delay discretionary purchases, the association said.
Energy-driven inflation reaches 2.9 percent in April
Recent official data show headline inflation in Germany rising to 2.9 percent in April, the highest rate since early 2024, with energy again the main contributor. The Federal Statistical Office attributed a 10.1 percent increase in energy costs in April as a key driver of the uptick in consumer prices.
Rising energy costs have an outsized effect on headline inflation and on household budgets, particularly for low- and middle-income households that spend a larger share of income on utilities and transport. That dynamic has reduced real incomes and contributed to the weakening consumption outlook measured by the barometer.
Retail turnover has contracted three months in a row
The squeeze on household spending is already visible in retail figures: inflation-adjusted turnover in the German retail sector fell by 2.0 percent in March, marking the sharpest month-on-month decline in three years. The drop represented the third consecutive month of falling real sales, underscoring the link between diminishing purchasing power and lower retail demand.
Retailers have reported that high prices for essentials have curbed spending on non-essential goods, amplifying concerns about inventory buildup and margin pressure. The combination of weaker footfall and constrained consumer wallets has raised alarms for businesses that rely on discretionary spending.
Government relief measures have had limited effect
Despite several government measures intended to ease the burden on consumers, the HDE said the initiatives implemented so far have not materially improved sentiment. Programs such as temporary reductions on fuel prices have provided some relief, but the association judged their effect on expectations to be limited.
Economists point out that short-term subsidies can blunt the immediate impact of price spikes but do not substitute for sustainable income growth or systemic reductions in energy costs. With households focused on their near-term finances, temporary relief has so far failed to translate into stronger buying intentions.
Growth outlook downgraded as risks mount
The broader economic backdrop has also shifted. Germany’s gross domestic product expanded by 0.3 percent in the first quarter, a modest increase that nonetheless outpaced the Eurozone average of 0.1 percent. Much of the early-year growth, however, reflected temporary public investment and was recorded before the escalation of geopolitical tensions in late February.
In light of these developments, the federal government revised its annual growth projection downward from 1.0 percent to 0.5 percent. The downgrade, together with persistent inflationary pressure, suggests that private consumption is unlikely to mount a significant recovery in the near term.
The HDE and other industry bodies are urging policymakers to focus on measures that both stabilise energy markets and support household incomes, arguing that confidence will only return when price pressures ease and consumers perceive a durable improvement in their purchasing power.
