German GfK Consumer Confidence At 5-Year Low

(RTTNews) - A gloomier economic outlook and concerns over rising inflation pushed German consumer confidence to a fresh five-year low, results of a closely watched survey revealed Tuesday.

The latest consumer confidence survey by the market research group GfK showed that its forward-looking consumer climate index for September slipped to 1.5 from a revised reading of 1.9 in August. According to GfK, the indicator last scored a comparable low value in summer 2003. Earlier, the reading for August was reported as 2.1, which was the lowest since June 2003. Economists were expecting a reading of 2 for September.

The survey, which covered 2,000 consumers, found that the subdued economic outlook and the expectation of additional price hikes depressed the consumer climate for August further. Additionally, the survey found the significantly lower crude oil prices did nothing to brighten the consumer mood.

The sub-index measuring economic expectations plunged to minus 21.8 in August from minus 8 in July. A year ago, the indicator stood at a significant level of plus 48.4.

According to GfK, consumers became more pessimistic about the economic outlook. There are rising fears of a possible recession in the largest Eurozone economy.

Official data showed that the German economy shrunk for the first time in around four years in the second quarter. According to the detailed report released on Tuesday, Germany’s Federal Statistical Office said that the German economy contracted 0.5% sequentially in the second quarter, after expanding 1.3% in the first quarter. The report showed that household spending contracted 0.7% in the second quarter.

Elsewhere, the Munich-based Ifo research institute reported that business confidence in Germany declined to a three-year low of 94.8 in August from 97.5 in July.

Meanwhile, income expectations index improved to minus 16.8 from minus 20. The current reading compares to plus 9.2 recorded in the previous year. The nominal wage and salary rises in this year, albeit remaining at a higher level than their averages, are likely to be offset by the rising prices.

Further, the survey revealed the indicator for consumption and buying propensity deteriorated to minus 27.9 from minus 26.2. The indicator last recorded similarly low values in mid-2005. Higher energy prices continue to squeeze purchasing power, preventing consumers from making major purchases at the moment.

According to the statistical office, annual inflation in Germany stood at 3.3% in July, unchanged from June and marking its highest level in almost fifteen years. Higher prices of energy and food had significant impact on the consumer price index in July.

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