German consumer morale drops to lowest in over a year

BERLIN Fri Dec 21, 2012 4:57pm IST

Shoppers rest with their purchases in downtown Hanover June 19, 2012. REUTERS/Fabian Bimmer

Shoppers rest with their purchases in downtown Hanover June 19, 2012.

Credit: Reuters/Fabian Bimmer

BERLIN (Reuters) - German consumer morale dropped for the fourth month running to its lowest level in more than a year as shoppers become increasingly wary of the effect the euro zone debt crisis is having on Europe's largest economy.

Market research group GfK said on Friday its forward-looking consumer sentiment indicator, based on a survey of around 2,000 Germans, eased to 5.6 heading into January from a downwardly revised 5.8 in December.

That was below the consensus in a Reuters poll of 27 economists for a reading unchanged from December's originally reported 5.9.

Germany's economy weathered the three-year euro zone debt crisis well until it slowed in the third quarter of the year. It is now expected to contract in the fourth quarter before rebounding somewhat early next year.

On expectations of a slow winter half of the year, the government may, however, cut its growth forecast for next year from its current 1 percent and the Bundesbank earlier this month slashed its own estimate to a meager 0.4 expansion.

Economists expect no recession - two consecutive quarters of contraction - and Ifo research institute, which also cut its growth forecast, said it did so because the slowdown occurred later than initially expected, but it would be short-lived.

As exports to key markets have flagged throughout the crisis, Germany has looked to markets outside Europe - where it sells about 60 percent of its exports - and economists have counted on private consumption to make up the shortfall.

Ifo's leading index, which points to developments up to six months in the future, showed earlier this week that business morale climbed a second month in a row and that companies expect their prospects to improve again early next year.

The GfK data showed German consumers' willingness to make purchases plummeted to the lowest since May 2010 and their expectations for economic development also fell.

But consumers' expectations for future earnings improved again after dropping the previous month. While consumers do not see wages rising strongly, they do expect them to outpace inflation, which could help return to spending next year.

Low interest rates are also encouraging Germans to spend their money rather than save as they traditionally tend to do.

"The German consumers continue to be uneasy," GfK said in a statement. "Especially the debt crisis is leading to a slight decline in economic expectations in December."

GfK said consumers now expected the German economy to go through a weak phase in coming months.

But Germany's retail association HDE said the poll was no warning sign and demand remained at a good level.

"We expect a stable development for retail in 2013 and stick to our forecast of nominal growth of 1.5 percent for Christmas and the whole year of 2012," said HDE spokesman Stefan Hertel.

(Reporting by Annika Breidthardt; Editing by Catherine Evans)

  • Most Popular
  • Most Shared

Pending Reform

REUTERS SHOWCASE

Power Theft

Power Theft

India to invest $4 billion to tackle power theft  Full Article 

Debt Funds

Debt Funds

India monitors foreign flows into debt funds, may tighten rules  Full Article 

Bulgari Back in India

Bulgari Back in India

CEO: we shouldn’t have left India so we’re back  Full Article 

 Hindu "Modi-fication"

Hindu "Modi-fication"

Fears grow about Hindu "Modi-fication" of education  Full Article 

Weak Credit

Weak Credit

Hard to hit tax revenue target, credit weak - Jaitley  Full Article 

China Rate Cut

China Rate Cut

China surprises with interest rate cut to spur growth  Full Article 

Gold Imports

Gold Imports

RBI cautious on response to gold import surge  Full Article 

Economic Corridor

Economic Corridor

China commits $45.6 billion for economic corridor with Pakistan  Full Article 

Overseas Funds

Overseas Funds

RBI says overseas borrowed funds can be parked with banks in India  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage