Consumer confidence drops for the third month

28th June 2005, Comments 0 comments

28 June 2005, BERLIN - High unemployment, record oil prices and uncertainty created by a planned early election, have resulted in German consumer confidence falling for the third month, a survey released on Tuesday showed.

28 June 2005

BERLIN - High unemployment, record oil prices and uncertainty created by a planned early election, have resulted in German consumer confidence falling for the third month, a survey released on Tuesday showed.

Drawn up by the Nuremberg-based GfK market research group, the index forecast a reading for July of 3.5 points which is down from a revised 4.3 points for June with pessimism about the outlook for incomes also a key factor in dampening consumer confidence.

Based on a survey of about 2,000 people, the index seeks to project household spending one month in advance in Europe's biggest economy.

"As summer 2005 started, consumers were still unable to see any real sign so far of recovery in the economy," the research group said releasing the survey.

While the prospects of early elections in Germany have helped to bolster the mood among the nation's business leaders and investors, Gfk believes that the polls have added to the uncertainty facing consumers.

"Unlike consumers, both the analysts and the business community see some positive developments on the horizon," the research group said.

This was partly a result of business hopes that the Germany's early election will pave the way for a rigorous round of economic reform. "Despite the announcement that the election will be held in autumn this year, there are no signs yet of the consumer climate trend reversing," GfK said.

The research group went on to say the survey underlines "the fact that Germans are still uncertain about future financial pressures or relief and do not feel confident about making plans for their future."

"Consumer expectations with regard to the economic trend therefore now again differ sharply from the forecasts by financial analysts and companies," GfK said.

Underscoring consumer worries the release of the GfK survey came just a day after oil prices shot up to over USD 60 (EUR 50) a barrel.

What is more, with opinion polls pointing to the conservative Christian Democrats (CDU) winning the election, analysts said that debate within the CDU about increasing sales tax has added to consumer concerns about rising prices.

The release of the latest consumer confidence survey also comes ahead of the publication of new German unemployment data.

Economists expect the jobless data, to be released on Thursday, will show only a very modest improvement in the labour market during June. Unemployment stood at a near record high of 11.6 per cent in May.

This also means that the propensity of German consumers to make larger purchases in the near future is still low, GfK said.

As a result, Germany been turning in a two-speed economic performance.

While exports continue to grow, domestic demand and in particular consumer demand has stagnated as a consequence of concerns about job security and the prospects of weak income growth.

DPA

Subject: German news

0 Comments To This Article