German consumers wary of recovery

26th May 2004, Comments 0 comments

26 May 2004 , NUREMBERG - German consumer confidence fell during May amid the country's continuing sluggish economy and fears of tax rises, a consumer research institute said Wednesday. The GfK market research group said its index fell to 4.5 from a revised 4.7 in the previous month. "German consumers appear to be doubting the ability of politicians and commerce to boost economic activity, which would provide new impetus for the labour market," a statement from the group said. The May dip in consumer confi

26 May 2004

NUREMBERG - German consumer confidence fell during May amid the country's continuing sluggish economy and fears of tax rises, a consumer research institute said Wednesday.

The GfK market research group said its index fell to 4.5 from a revised 4.7 in the previous month.

"German consumers appear to be doubting the ability of politicians and commerce to boost economic activity, which would provide new impetus for the labour market," a statement from the group said.

The May dip in consumer confidence follows a slight improvement in April but is in line with the downward trend of previous months after reaching 5.5 in November.

Key consumer climate indicators including economic outlook, income expectations and propensity to buy all suffered losses in May.

GfK said that despite unexpected growth in gross domestic product, German consumers remain doubtful.

Strong export performance fuelled the strongest quarterly growth in three years in the first quarter, with the economy rising 0.4 percent over the final three months of last year, the government reported Tuesday.

But GfK said with unemployment remaining high and still rising, no impetus for economic growth could be expected from private consumption.

Income expectations are "subdued" while "the propensity to make larger purchases remains low too", a statement said.

"The buoyant consumption, essential to a recovery of the German economy, has not manifested itself as yet."

Consumer expectations of economic growth in Germany have also fallen again after an improvement in April. The indicator was down by 10 points on the previous month, and now stands at minus 18, the lowest level since May last year.

"German consumers clearly have doubts that the government, opposition and commerce in Germany are in a position to resolve the most pressing issues in the short term, which include the rising deficit in the state budget and the weak economy," GfK said.

The research group said consumer uncertainty could be seen particularly on income expectations, with huge fluctuations in the index since June last year.

People are concerned about the possibility of tax increases by the government in an effort to reduce the budget deficit, GfK said. Proposals to cut back or abolish tax-free savings as well as subsidies for home owners and commuters have also fuelled uncertainties on income expectations.

A reduction in consumer spending may also be exacerbated by rises in fuel prices which have increased fears of inflationary developments.

"Experience has shown that expected increases in prices have a tendency to curb consumption among Germans. If people have to pay more for their petrol, they have less disposable income for making other purchases," it said.

 

 DPA

Subject: German news

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