Consumer pessimism caused by Russia's ongoing invasion of Ukraine means Europe's largest economy could risk a recession in the near future, a key survey has suggested.

The consumer sentiment index, based on the survey by pollster GfK, tumbled to minus 15.5 points going into April from a revised minus 8.5 points a month earlier.

Income expectations have been particularly hard hit, falling by 25 points to minus 22.1 in March, the lowest level since January 2009 in the midst of the global financial crisis.

The survey, in which some 2,000 people participated, showed that people in Germany were currently very pessimistic about the state of the economy, with the relevant index falling 33 points to minus 8.9 in March. This came after a rise in the previous two months attributed largely to the gradual lifting of coronavirus restrictions.

What is driving the slump?

Germany has already been experiencing strong inflation recently, with consumer prices rising by 5.1% in February, largely before Russian President Vladimir Putin ordered the start of the invasion on February 24.

The country is also highly reliant on imports of Russian gas for domestic heating and industry, meaning the war is likely to have a strong impact on energy prices that were already skyrocketing before the Russian attack started.

Rising fuel bills means "consumers see their purchasing power melting away," the GfK said in a statement.

It said sanctions imposed by Germany on Russia over the invasion, the high energy costs and the disruption of supply chains by the war meant that "the risk of a recession has risen sharply."

GfK consumer expert Rolf Bürkl said the recovery of German consumer morale in the long term would be possible only if there were a rapid cease-fire in Ukraine followed by peace negotiations.

"The domestic economy would then significantly contribute to overall economic development again as a result of declining uncertainty, and the easing of pandemic-related restrictions would also be able to have its positive effect," Bürkl said.

The survey took place from March 3 to March 14.

tj/wmr (AFP, Reuters)