(Adds IfW) By Riham Alkousaa BERLIN, April 23 (Reuters) - German consumer morale was driven to a record low heading into May, a survey showed on Thursday, with the coronavirus pandemic having a far more severe impact on household spending intentions than forecasters had estimated. The GfK consumer sentiment indicator, based on a survey of 2,000 Germans, entered negative territory, dropping to -23.4 points from a revised 2.3 in the previous month. A level below zero indicates an expectation that consumption will fall from last year. A Reuters poll of analysts had forecast a smaller drop to -1.8. "The consumer climate is currently in free fall," Rolf Buerkl, a researcher for Nuremberg-based GfK, said in a statement, adding that a value of -23.4 was unprecedented in the history of the consumer climate survey. "Retailers, manufacturers and service providers must prepare for an imminent, very severe recession," Buerkl said. Consumer sentiment would remain subdued in the coming months as measures to curb the outbreak would be eased only slowly. The drop was exacerbated by a spike in consumers' propensity to save in the crisis, GfK said. Production shutdowns, shops' closures and supply chain disruptions forced many companies to put employees on short-time work schemes, hitting consumers' income and economic expectations, the survey showed. However, this week stores of up to 800 square metres (8,600 square feet), were allowed to open provided they stick to strict social distancing rules, a measure the IfW economic institute in Kiel said was leading to something of a high street revival. "Retail can breathe again, this week's easing is bringing a noticeable alleviation in some areas which you can see from the number of people in town centres," said IfW President Gabriel Felbermayr. The number of people in Dortmund city centre, in western Germany, was about 51% of what it would usually be during a normal working day and other cities were seeing similar numbers, said the IfW. The situation looked different, though, in other areas such as the southern state of Bavaria which has the highest number of coronavirus cases and deaths. The number of people in Munich city centre amounted to only about 13% of the normal. A figure for consumers' income expectations in April recorded the biggest drop since the survey started in 1980. "The fear of job loss has risen sharply among many employees," Buerkl said. "This is a significant barrier to consumption, which is intensified by the fact that closed shops often make it impossible to buy stuff." May 20 April 20 May 19 Consumer climate -23.4 2.3 10.2 Consumer climate components April 20 March 20 April 19 - willingness to buy -4.6 31.4 53.1 - income expectations -19.3 27.8 56.8 - business cycle expectations -21.4 -19.2 3.0 NOTE - The consumer climate indicator forecasts the development of real private consumption in the following month. An indicator reading above zero signals year-on-year growth in private consumption. A value below zero indicates a drop in comparison with the same period a year ago. According to GfK, a one-point change in the indicator corresponds to a year-on-year change of 0.1 percent in private consumption. The "willingness to buy" indicator represents the balance between positive and negative responses to the question: "Do you think now is a good time to buy major items?" The income expectations sub-index reflects expectations about the development of household finances in the coming 12 months. The additional business cycle expectations index reflects the assessment of those questioned of the general economic situation in the next 12 months. (Reporting by Riham Alkousaa and Reinhard Becker Editing by Peter Graff)
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